Economics

The performance of a countrys economy is based on the comparison between the performances in the period of consideration with the previous period. For instance, the article highlights that according to economists GDP in U.S dropped at a rate of 5.4 in the fourth quarter. This was the worst pace of contraction since 1982 .The economists further project that the drop is a direct consequence of the increasing unemployment levels as companies try to cut down on the production costs. Consumer spending also contributed to the contraction of the U.S economy. It is worth noting that consumer spending contributes 70 of the U.S economy. Consumer spending recorded an al time low when it contracted by an estimate of 3.8. A reduction in the level of inventories by 1.3 was also major contributor of the decline in economic. Final contributor to the contraction of U.S economy was the exports which economists estimated to have shrinked by 6 (Homan, 2009).

Gross domestic product (GDP) is a measure of how the economy of a country is performing. It sis usually the dollar value of all goods and services produced within a country over a specified period of time. It is normally the summation of consumption, investment, government spending and net exports.

Consumption is the largest component of GDP and in comprises of the private household expenditures. Consumers do spend on durable, on-durable goods and services.  It is often affected by the job cuts and increasing inflation levels. In that, the purchasing power of individuals is minimal especially when one is unemployed. However, the latest recession saw consumer spending record mild slow down due to the use of credit card debt by consumers. Finally, it should be noted that, a decline in consumer spending has direct impact on the employment levels within a country. In that, if the supply of commodities outnumbers the demand chances are that manufacturing industries will close some of the production units cut on the production costs (Homan, 2009). To cut on the production costs will involve the elimination of any redundant labor which will be economical to work with in the short run.