This exercise demonstrated that the change in the real GDP growth rate in Q4 2008 was -6.3%. Using what you have learned in the previous modules, if you were an advisor to President Obama, what types of policies would you advocate to stimulate the economy?
GDP growth also known as economic growth can be both negative and positive. However in our case where the GDP is negative, it simply indicates that the economy is going downwards. The main factors that cause negative GDP are recession and depression in the economy. “The BEA final report revised its U.S. GDP growth rate for Q4 2008 to a negative 6.3%, worse than the 6.1% drop it reported in its preliminary report last month. This is the worst slowdown since Q1 1982, when GDP fell 6.4%” (Amadeo, 2010)
Cut down in exports is due to the increase in the value of dollar; however the recession causes the economy to slump down. Looking at 2008, economic growth was merely 1.1%. Spending in 2008 however helped the economy from deteriorating more than this and this also occurred because no proper mechanism was applied to fix this scenario. Therefore, 2008 and further we saw a heavy decline in the economic conditions. This also indicates that there will be further job cuts and unemployment (Amadeo, 2010)
Thus looking at the above scenario, I would like to advise that there are a couple of ways to improve this negative growth in GDP. First, have more people working. More people mean more production, and so on. Because what one is unable to do by himself, can be divided among 3-4 or even more people. Secondly we need to ensure efficient utilization of these employees. Advanced technologies and machines will allow more efficient and quick working. If we look at it on the macro stage, it means that cutting down the rate of interest can provide easy accessibility to money make it probable that that advanced technology will be hired to bring in more efficiency. If the value of dollar drops in comparison to other currencies, it simply denotes that demand for products should be increased. Once the productivity is increased, the prices will reduce automatically.
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