GDP of USA in the past 30 years (Elaine)
following diagram is the GDP of U.S. last 30 years.
the diagram, the GDP growth has been showed (Amadeo, n.d.) from 1987
to 2006, the GDP kept increasing slowly. However, there are the periods of recession
for U.S in 2007-2008. Thus the GDP growth rate is negative.
periods of recession (Elaine)
2007, the Bank calamity is happened. The 2008 financial crisis happened. Since
the Great Depression of 1929, it is the worst economic calamity. It became to
the great recession. The prices of housing fell 31.8%, it is more than during
the Great Depression of 1929. It began in
2007 with a climacteric in the sub-prime pledge market in the U.S.
it developed into international banking climacteric because an
Lehman Brothers. The investment bank crumbled on September 15, 2008 (Williams,
The Lehman Brothers let the U.S. GDP
decreasing immediately and it became a world great recession. Amadeo wrote that, “Some Hedge funds and financial
institutions around the world owned the mortgage-backed securities. The
securities were also in mutual funds, corporate assets and pension funds (Amadeo, n.d.).
Lehman Brothers is kind of the example. Although the U.S. government used
different monetary and fiscal policies, the calamity became Great Recession and world economic downturn
followed to happen.
to increase GDP growth (Elaine)
the policy to increase GDP growth, government can use tax free or other tax
fiscal policies. For example, they tried to cut down the tax discount or
rebates to low-income taxpayers and preferential tax for business or
investment. Tax discount or rebates is successful for tax country because the
addition money can use again. It lets people use more money base on the
Keynesian model. Many people in U.S. have benefit from tax policy because U.S.
is the country which has many different taxes. Therefore, using tax policy is successful
in U.S. For example, U.S. had “The Economic Stimulus Act”
in 2008. It
included tax policy such as tax rebates to low- and middle-income U.S. taxpayers
(Gpo.gov, 2008).. There is a research states that people use more money if they
get tax rebates. The research is compared the spending for households get tax
rebates and households do not get tax rebates. The results found that “The
Economic Stimulus Act “increased spending for the family by 3.5% when they
got the tax rebates. Thus, overall nondurable consumption is increased 2.4% in
the second quarter of 2008(Broda and Parker, 2008). In this case, it is
extremely successful in U.S. because it motivates the economic.
rate of U.S. (Elaine)
following diagram is the unemployment rate of U.S. last 30 years(Bls.gov, n.d.).
the diagram, it shows that the unemployment rate is decreasing from 1992 to 2000.The
unemployment rate is decreasing in 2003-2006 and 2009-2016 too. From 2007 to 2009,
unemployment rate is increasing rapidly. The diagram shows that the
unemployment rate undulates.
rate during economic Recession and the policy (Gordon)
trend of unemployment rates from 1992 to 2000 decreased. Although the slope was
up since 2000, it still stood under 6.0 or less. However, there was a crisis in the subprime
mortgage with the collapse of the investment banks Lehman Brothers in 2008 (Edition.cnn.com,
the economic recession occurred in US and the whole economy collapse. Through the credit squeeze
companies could not lend the money from bank for operation or even close.
abundant shutting of companies, there were lots of people lost them jobs after
the credit crisis. The unemployment increased rapidly from 2008 to 2011. The total job losses were 2.6 million at the end of
2008 or the highest level in more than six decades. The total number of
unemployed Americans rose by 632,000 to 11.1 million (Goldman, 2009). The peak of unemployment rate was more than
9 in 2011. The cyclical unemployment deals with the economy’s business cycle
and there are job losses during the economic downturns.
credit crisis in 2008, US government adapted the monetary and fiscal policy. The
US unemployment rates at 4.1 in 2017 and it is the lowest at 17 years. The
number of unemployment declines by 40 thousand to 6.58 million.
of USA in the past 30 years (Gordon)
The inflation rate related to the consumer
price level (Trading Economics, n.d.). Inflation Rate in the
United States averaged 3.27 percent from 1914 until 2017. The peak was 23.7% in
1920 and the lowest were -15.8% in 1921. After 1980, the inflation rate dropped
and it stayed below 4%.
below tables records the average inflation of United States
in USA (Gordon)
effects of the crisis in 2008 on inflation expectation were temporary in the
United States. Inflation has stayed in a relatively narrow range of 3%.They lie
roughly in the middle of the 3.5 to 4% range. The financial crisis did not
significantly change U.S. household long-run inflation expectations
in USA (Gordon)
US government cut the discount rate and extend term loans to banks in 2008 and
lower the federal funds rate by 50 basis points. The Federal Reserve provides
liquidity and support credit market functioning, including the establishment of
a number of emergencies lending facilities and the creation or extension of
currency swaps agreements with 14 central banks of the world. Although the inflation
declined sharply and down to -0.34% in 2009, the unemployment rate rose (Bernanke,
of Hong Kong in the past 30 years ( Lazie)
Graph one reflects Hong Kong GDP
keeps going up and increasing from 1986 to 2016.
From graph two, it shows the growth rate clearly. In 1997 and 2003, the GDP growth
rate is going down even to the minus number.
Recession of Hong Kong (Lazie)
In 1997, there is a financial crisis
in Asia and Hong Kong is also affected. The
Asian Crisis started with attacks of currencies in the region. The Thai
baht was by all accounts the first to come under heavy selling pressure. Also,
the rapid depreciation of the baht drew the attention of banks and investment
funds to the conditions of other countries. Therefore, other currencies are also being attacked. There are some serious events that led to further
attack Hong Kong dollars. Firstly, bank Peregrine Investment Holdings made a
false decision that led to an 8.7% drop in stock market index on 12 January
1998. Secondly, Yen sharp drop and it sparked attacks of
the Hong Kong dollar and caused stock prices to drop. This
recession triggered a deflationary spiral that lasted for almost 6 years.
Invisible trade of Hong Kong in 2003
is strongly affected by SARS. The percentage of export of services sharply
falling down by 12 percent in second quarter. Consumer spending suffered a
severe blow to the second quarter of 2003 upon the impact on SARS. Yet it staged a distinct turnaround in the third and
fourth quarters, as the SARS impact dissipated and as overall economic activity
turned around. Overall investment spending also picked up in the latter part of
the year, amid at renewed
interest in acquisition of machinery and equipment.
GDP Growth Policy (Lazie)
The inauguration of the Individual
Visit Scheme (IVS) in 2003 liberalized Mainland tourist visits to Hong Kong and
led to an explosive growth of Mainland visitors. Before the inauguration of IVS
in mid-2003, Mainland tourist visits to Hong Kong were restricted to group
tours and the number of IVS visitors rose from less than 0.7 million in 2003.
However, it rose to over 31 million in 2014, accounting for 66% of Mainland
visitors and 51% of all visitors after implement IVS in 2014. Although IVS
bring a huge economic contribution to tourism, it also brings a side effect to Hong Kong. The problem is IVS led to
overcrowding and escalating social tensions in
the local population in Hong Kong and culture of Mainland china cause residents
in Hong Kong dissatisfaction.
rate of Hong Kong (Rounda)
Years Unemployment Rate and the period of recession in Hong Kong
the past three decades, the average unemployment rate was recorded 3.69%, the
highest rate was 8.5% in June of 2003 and the lowest rate was 1% in July of
1997 property prices started to deteriorate. The unemployment rate in 2002 was
at a 7% high. At the same time, the SARS epidemic hit Hong Kong during the
first half of 2003, which increased the unemployment rate for the record high
of 8.5%. The most affected industries were the retail and tourism sectors. For
example, the most significant decrease was noticeable where the average
passenger numbers fell from a daily average of 100,000 to about 10,000. That is
a 90% decrease. Retail giant Giordano (709.hk), business fell by as much as 30%
during April 2003. The demand shocks lead to a dramatic slowdown of the
economy, as a result pushed the unemployment rate higher. (Tradingeconomics.com,
for Economic Recovery
change in old economy to new economy, for example, from clothes manufacturing
to financial, tourism, logistics and high tech industries. This change in economic resulted in
previously skilled labours were no longer required hence an increase in
structured unemployment. Government
could provide some adequate training for outdated labours to acquire and adapt
new skills like the Employee Retraining Board (ERB). On the other hand, Government could also
reduce profit tax for businesses and rebate salary tax for employees.
businesses, this will reduce operation costs and therefore they will have more
cost to hire more people. This will decrease the unemployment rate when more
people got their job.
Years Inflation and Deflation of Hong Kong
the past three decades, the average inflation rate was recorded 4.4% in 2003,
the highest rate was 16% in October of 1981 and the lowest rate was -6.1% in
August of 1999. (Trading Economics, 2018). The relationship between
unemployment and inflation rates is the complete opposite. As the two graphs show, when the unemployment
rate was at its lowest (1989), the inflation was at its highest. This is because more people were willing to
spend their money(Tradingeconomics.com, n.d.).
Tightening monetary and fiscal
policies can restrain aggregate demand. Government restraint in raising charges
for its services and public housing rents will help to slow measured inflation
but it is not enough to lower inflation level. Moreover, increases pushing up costs with wage,it mean
increasing the spending of government. There is a limitation for government can
freeze these charges.
Therefore, fiscal restraint will
probably be the most significant fiscal policy which the government can adopt
to fight inflation. The impact will be to slow the momentum of inflation.