Paper Topic:

report on the american economy

Running head : US ECONOMY

An Overview of the U .S . Economy from 2004 to 2007

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An Overview of the U .S . Economy from 2004 to 2007

Despite the economic turmoil that the country is embroiled in , the United States remains the largest and most technologically powerful economy in the world . The country has the highest level of output in the world , with gross domestic product (GDP ) valued at US 13 .21 trillion in 2006 . As one of the world 's most advanced economies , the

country still leads the way in the information technology revolution and in many other areas of technical innovation . The U .S . economy is diverse , with leading industries including automobile , aerospace , telecommunications chemicals , electronics and military equipment . For the past three years United States still remains a key engine of the global economy , serving as the source of aggregate demand for the world economy as the world 's export-oriented economies sell record amounts in the United States While this has helped sustain aggregate demand in many countries where it would otherwise have been even weaker , the United States has run large current account deficits in trade with its major trading partners

Following robust growth of an average 3 .9 percent in 2004 (see Figure 1 , the U .S . economy continued to grow strongly in 2005 and 2006 , even in the face of a withdrawal of monetary stimulus and high oil prices Real GDP registered growth of 3 .2 percent in 2005 and 3 .3 percent in 2006 , with household spending remaining the principal driver of the expansion , spurred by mortgage borrowing and double-digit house price inflation . Business investment also remained robust , supported by declines in capital goods prices , the economic expansion , and high profits despite higher interest rates . However , the economy has cooled recently , largely reflecting a drag from residential investment as the housing market has weakened substantially . Weakness in business investment and net exports , as well as an inventory correction amplified the downturn in early 2007 (Amiti Stiroh , September 2007 As a result , real GDP growth is expected to slow to 2 .2 percent in 2007

Figure 1 . US Quarterly Gross Domestic Product Growth in from 2004 to 2007 (Source : EIU Data Services

Kemm (2007 ) expected that interest rates will remain high through the end of the second quarter as the Fed kept the federal funds rate at 5 .25 percent . As a result , housing expenditures will be soft at best . Softer housing expenditures will spill over to lower expenditures on consumer durables as well . However , generally low unemployment (4 .6 percent in January ) and lower gasoline prices are expected to dampen overall potential declines in consumer spending . With continuing strong domestic demand , the current account deficit , which hit 880 .3 billion in the third quarter of 2006 , could reach a trillion dollars in 2007 . Kemme (2007 ) warned that a weaker dollar will be seen to go against freely-traded currencies , the Euro in particular , and expected stronger exports to the Euro...

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