Article Review
The US economy is exhibiting a slower recovery after the recession of 2009. The second quarter of 2015 has shown moderate growth though the first quarter was rather low on growth pace. While the first quarter growth rate was 0.6 per cent after a contraction of 0.2 percent in the previous quarter the second quarter growth was a modest 2.3 per cent . The economy grew at an annual average rate 0f 2 per cent from 2012 -14. In the second quarter of 2015 the growth was 1.5 per cent which is lower than the growth rate in the same period in the previous year which was around 1.9 per cent. In spite of the slower pace of growth the Fed is contemplating on a rate increase in September from the near zero rate. The Fed has contended that the economy is showing robustness in its growth as the consumption spending and the household sector has shown steady positive improvements.
A section of the economists is of the opinion that the economy is in a better state than before. Consumption spending has moved upward strongly and investment in the housing sector has also been quite impressive. The weak dollar has led to a fall in the exports and rise in imports. This fall in exports had a somewhat dampening effect on the GDP.
The consumer spending was on a positive shape due to the fall in gasoline prices that lowered the household expenditure on fuel. Consumer spending, which constitutes two thirds of the total spending in the US, has increased by 2.9 per cent in the second quarter of 2015. Investment in the housing sector has increased by 6.5 per cent compared to a 10 per cent growth in the last two quarters. Government expenditure has also been another driving force, increasing by 0.8 per cent against a fall by 0.1 per cent in the previous quarter.
In the figure below we depict the present situation where the aggregate demand (AD) has increased due to rise in consumption, investment and government spending . The AD curve has shifted rightwards leading to rise in the price level and output or GDP.
AD1
AD0
Y0 Y1 Y
Works Cited
Davidson, Kate. "U.S. Economy Expanded 2.3% in in 2nd Quarter." The Wall Street Journal 13 July 2015. English.
Mankiw, G.N. Macroeconomics. Macmillan, 2013.
