TheGDP of USA in the past 30 years (Elaine)Thefollowing diagram is the GDP of U.S.
last 30 years. Inthe diagram, the GDP growth has been showed (Amadeo, n.d.) from 1987to 2006, the GDP kept increasing slowly. However, there are the periods of recessionfor U.S in 2007-2008. Thus the GDP growth rate is negative. Theperiods of recession (Elaine)In2007, the Bank calamity is happened.
The 2008 financial crisis happened. Sincethe Great Depression of 1929, it is the worst economic calamity. It became tothe great recession.
The prices of housing fell 31.8%, it is more than duringthe Great Depression of 1929. It began in2007 with a climacteric in the sub-prime pledge market in the U.S.Unfortunately,it developed into international banking climacteric because aninvestment bankLehman Brothers. The investment bank crumbled on September 15, 2008 (Williams,2010).The Lehman Brothers let the U.S.
GDPdecreasing immediately and it became a world great recession. Amadeo wrote that, “Some Hedge funds and financialinstitutions around the world owned the mortgage-backed securities. Thesecurities 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 useddifferent monetary and fiscal policies, the calamity became Great Recession and world economic downturnfollowed to happen. Policyto increase GDP growth (Elaine)Forthe policy to increase GDP growth, government can use tax free or other taxfiscal policies. For example, they tried to cut down the tax discount orrebates to low-income taxpayers and preferential tax for business orinvestment. Tax discount or rebates is successful for tax country because theaddition money can use again.
It lets people use more money base on theKeynesian 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 successfulin U.S. For example, U.S. had “The Economic Stimulus Act”in 2008. Itincluded 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 theyget tax rebates. The research is compared the spending for households get taxrebates and households do not get tax rebates.
The results found that “TheEconomic Stimulus Act “increased spending for the family by 3.5% when theygot the tax rebates. Thus, overall nondurable consumption is increased 2.4% inthe second quarter of 2008(Broda and Parker, 2008). In this case, it isextremely successful in U.S.
because it motivates the economic. Unemploymentrate of U.S. (Elaine)Thefollowing diagram is the unemployment rate of U.S. last 30 years(Bls.gov, n.
d.). Inthe diagram, it shows that the unemployment rate is decreasing from 1992 to 2000.
Theunemployment rate is decreasing in 2003-2006 and 2009-2016 too. From 2007 to 2009,unemployment rate is increasing rapidly. The diagram shows that theunemployment rate undulates.
Unemploymentrate during economic Recession and the policy (Gordon)Thetrend of unemployment rates from 1992 to 2000 decreased. Although the slope wasup since 2000, it still stood under 6.0 or less. However, there was a crisis in the subprimemortgage with the collapse of the investment banks Lehman Brothers in 2008 (Edition.cnn.com,2008),the economic recession occurred in US and the whole economy collapse. Through the credit squeezefrom banks,companies could not lend the money from bank for operation or even close. Withabundant shutting of companies, there were lots of people lost them jobs afterthe credit crisis.
The unemployment increased rapidly from 2008 to 2011. The total job losses were 2.6 million at the end of2008 or the highest level in more than six decades. The total number ofunemployed Americans rose by 632,000 to 11.
1 million (Goldman, 2009). The peak of unemployment rate was more than9 in 2011. The cyclical unemployment deals with the economy’s business cycleand there are job losses during the economic downturns. Aftercredit crisis in 2008, US government adapted the monetary and fiscal policy. TheUS unemployment rates at 4.1 in 2017 and it is the lowest at 17 years.
Thenumber of unemployment declines by 40 thousand to 6.58 million. Inflationof USA in the past 30 years (Gordon)The inflation rate related to the consumerprice level (Trading Economics, n.d.). Inflation Rate in theUnited States averaged 3.27 percent from 1914 until 2017.
The peak was 23.7% in1920 and the lowest were -15.8% in 1921. After 1980, the inflation rate droppedand it stayed below 4%. Thebelow tables records the average inflation of United States The average inflation 2000 3.38% 2001 2.83% 2002 1.59% 2003 2.
27% 2004 2.68% 2005 3.39% 2006 3.
24% 2007 2.85% 2008 3.85% 2009 -0.34% Recessionin USA (Gordon)Theeffects of the crisis in 2008 on inflation expectation were temporary in theUnited States. Inflation has stayed in a relatively narrow range of 3%.
They lieroughly in the middle of the 3.5 to 4% range. The financial crisis did notsignificantly change U.S. household long-run inflation expectations Policyin USA (Gordon)TheUS government cut the discount rate and extend term loans to banks in 2008 andlower the federal funds rate by 50 basis points. The Federal Reserve providesliquidity and support credit market functioning, including the establishment ofa number of emergencies lending facilities and the creation or extension ofcurrency swaps agreements with 14 central banks of the world. Although the inflationdeclined sharply and down to -0.
34% in 2009, the unemployment rate rose (Bernanke,2012). GDPof Hong Kong in the past 30 years ( Lazie)Graph one reflects Hong Kong GDPkeeps going up and increasing from 1986 to 2016.From graph two, it shows the growth rate clearly. In 1997 and 2003, the GDP growthrate is going down even to the minus number.
Recession of Hong Kong (Lazie)In 1997, there is a financial crisisin Asia and Hong Kong is also affected. TheAsian Crisis started with attacks of currencies in the region. The Thaibaht 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 investmentfunds to the conditions of other countries.
Therefore, other currencies are also being attacked. There are some serious events that led to furtherattack Hong Kong dollars. Firstly, bank Peregrine Investment Holdings made afalse decision that led to an 8.7% drop in stock market index on 12 January1998.
Secondly, Yen sharp drop and it sparked attacks ofthe Hong Kong dollar and caused stock prices to drop. Thisrecession triggered a deflationary spiral that lasted for almost 6 years.Invisible trade of Hong Kong in 2003is strongly affected by SARS. The percentage of export of services sharplyfalling down by 12 percent in second quarter. Consumer spending suffered asevere blow to the second quarter of 2003 upon the impact on SARS. Yet it staged a distinct turnaround in the third andfourth quarters, as the SARS impact dissipated and as overall economic activityturned around. Overall investment spending also picked up in the latter part ofthe year, amid at renewedinterest in acquisition of machinery and equipment.
TheGDP Growth Policy (Lazie)The inauguration of the IndividualVisit Scheme (IVS) in 2003 liberalized Mainland tourist visits to Hong Kong andled to an explosive growth of Mainland visitors. Before the inauguration of IVSin mid-2003, Mainland tourist visits to Hong Kong were restricted to grouptours 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 Mainlandvisitors and 51% of all visitors after implement IVS in 2014.
Although IVSbring a huge economic contribution to tourism, it also brings a side effect to Hong Kong. The problem is IVS led toovercrowding and escalating social tensions inthe local population in Hong Kong and culture of Mainland china cause residentsin Hong Kong dissatisfaction. Unemploymentrate of Hong Kong (Rounda)30Years Unemployment Rate and the period of recession in Hong Kong Inthe past three decades, the average unemployment rate was recorded 3.
69%, thehighest rate was 8.5% in June of 2003 and the lowest rate was 1% in July of1989. Since1997 property prices started to deteriorate. The unemployment rate in 2002 wasat a 7% high. At the same time, the SARS epidemic hit Hong Kong during thefirst half of 2003, which increased the unemployment rate for the record highof 8.5%. The most affected industries were the retail and tourism sectors.
Forexample, the most significant decrease was noticeable where the averagepassenger numbers fell from a daily average of 100,000 to about 10,000. That isa 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 theeconomy, as a result pushed the unemployment rate higher. (Tradingeconomics.
com,n.d.) Policyfor Economic RecoveryThechange in old economy to new economy, for example, from clothes manufacturingto financial, tourism, logistics and high tech industries.
This change in economic resulted inpreviously skilled labours were no longer required hence an increase instructured unemployment. Governmentcould provide some adequate training for outdated labours to acquire and adaptnew skills like the Employee Retraining Board (ERB). On the other hand, Government could alsoreduce profit tax for businesses and rebate salary tax for employees.
Forbusinesses, this will reduce operation costs and therefore they will have morecost to hire more people. This will decrease the unemployment rate when morepeople got their job. 30Years Inflation and Deflation of Hong Kong Inthe 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% inAugust of 1999. (Trading Economics, 2018). The relationship betweenunemployment and inflation rates is the complete opposite.
As the two graphs show, when the unemploymentrate was at its lowest (1989), the inflation was at its highest. This is because more people were willing tospend their money(Tradingeconomics.com, n.d.). Inflation PolicyTightening monetary and fiscalpolicies can restrain aggregate demand.
Government restraint in raising chargesfor its services and public housing rents will help to slow measured inflationbut it is not enough to lower inflation level. Moreover, increases pushing up costs with wage,it meanincreasing the spending of government. There is a limitation for government canfreeze these charges. Therefore, fiscal restraint willprobably be the most significant fiscal policy which the government can adoptto fight inflation. The impact will be to slow the momentum of inflation.