Question

Write a paragraph arguing why the US or Chinese economy is stronger than the other using at least 5 macroeconomic statistics from the world bank data sheet. In your response, you must explain why each of the statistics you use are relevant.

Answer 1

The five macroeconomic parameters that determined economic health or progress of an economy are GDP growth, employment rate, inflation, industrial output, savings and investment, These macroeconomic factors are explained below:

1. GDP Growth: GDP growth reflects overall value of consumption and savings of an economy during a fiscal period High GDP growth reflects economic progress of an economy. The GDP growth rate is influenced by a number of factors such as government's fiscal policy, flow of investment, balance of payment, external debts etc. The GDP growth of US economy in the year 2018 was 2.9 and it is expected to be lower at 1.6 in 2021 as per World bank statistics.

2. Employment rate: Employment rate indicates the rate of job addition in an economy. It depends on capital investments, government policies, foreign trade, education and political stability. The employment rate of US economy was 4.35% in 2017 as per the World bank statistics.

3. Interest rates: Interest rates are determinant of cash flow in an economy. When flow of money increases, it creates additional investments, raises industrial output and creates job opportunities. However, when money supply in an economy is contracted, it also decreases new investment, and reduces employment rate. The central bank of a country regulates the flow of capital by changing key interest rates periodically. The real interest rate of US economy during 2017 was 2.06% in 2017 as against 3.11% in 2016 as per the World bank statistics.

4. Industrial output: Industrial output is output generated by manufacturing sector of an economy. The industrial output depends on multiple factors such as foreign investment, government fiscal policy, inflation rate, public debt etc. The contribution of manufacturing sector in GDP rate of US economy was 11.601% as per the world bank statistics.

5. Savings and investment: Both savings and investment are inter-related terms. When investment increases it also generates additional job opportunities for people which means higher income and savings of people in an economy. However, savings depend on many other factors such as inflation rate, balance of payment position of a country, interest rates etc. The gross national savings of US was 18.90% of total GDP of US economy in 2017 as per the world bank statistics.

All the macroeconomic data of US economy are extracted from world bank economic statistics report. The macroeconomic data depicted in the paragraph are also not too old i.e., more than 4 years and therefore, more authentic. The above-mentioned macroeconomic data indicates that US economy reflects balanced growth and more stable than other economies of the world. Though expected decline in employment rate in 2021 is really a cause of concern for the US government but other macroeconomic variables such as industrial output, gross national savings, interest rates and GDP growth indicates progress of US economy.