The Bush Tax Cuts and the Deficit - Research Paper Example

 ‘Extend Tax Policies’ is one of the major variables that the graphs illustrate and it demonstrates the anticipated trend of deficit. It is shown in deep blue colour and has varying percentages, of the nation’s Gross domestic product, over time. The cuts would reduce the deficit in the short run, over a three-year period, before the deficit begins to increase.

The graph further shows that the Conges will continuously nullify regulations to reduce Medicare payments. Another significant feature of the graph is the interest payment that the government is likely to occur based on its borrowings. The interest also has an increasing trend and the features suggest that the proposed tax cut was not a sound move. The graph is suitable for representing the data that is aimed at comparing different variables across time. It consolidates the variables in one graph and allows for easier comparison than if the variables were represented in separate simple line graphs.

The use of different and visible colours also identifies the effectiveness of the graph in communicating predicted changes in economic factors following tax cuts. The audience can easily identify differences in the sizes of each segment to understand the associated changes (Rampell, 2011; Mmerrier, Logan, and Williams, 2007). Part 2: Data presentation on an economic variable Gross domestic product indicates a country’s level of productivity and is one of the major indicators of economic capacity and economic growth.

The Gross Domestic Product at purchasing power parity is the total value of the commodity that an economy produces and is valued in United States Dollar value (The World Bank, 2012). Changes in the value of an economy’s currency, therefore, leads to corresponding changes in the value of a corresponding gross domestic product based on purchasing power parity (Brezina, 2011). It is therefore a reliable measure of an economy’s potential for comparison with other economies for economic decisions in the international setup.

Its time series analysis in an economy also offers a basis for understanding economic trends in the given economy and allows for predictions. Consideration of growth rate instead of actual values simplifies analysis and represents both increments and decrements with positive and negative signs respectively. The following data represents growth in gross domestic product for Qatar based on purchasing power parity. The data has been retrieved from the Index Mundi database. Table 1: Gross domestic product growth rate for Qatar based on purchasing power parity Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Growth (%) 7.75 3.35 -0.31 3.21 16.98 -1.88 11.08 3.14 1.82 -0.01 13.

73 (Index Mundi, http://www.indexmundi.com/qatar/gdp_per_capita_(ppp).html) The following table summarizes descriptive statistics for the data. Table 2: Major descriptive statistics Mean 5.35 Standard deviation 6.19 Median 3.21 Range 18.86 Maximum 16.98 Minimum -1.88 The statistics show that Qatar had an average growth rate of 5.35 per cent in the ten-year period from the year 2000 to the year 2010. The median for the data was 3.21 per cent but the mean is a better estimator because it considers both rank and quantity of the yearly gross domestic product growths. The data however has a high value of standard deviation and this indicates the volatility of the growth rate. This means a high level of risk in investing in the country, based on its instantaneous data on gross domestic product. The wide range of values in the growth rate, 18, supports this as it indicates the existence of wide variances in growth rates from mean values. The minimum value is – 1.88 and shows the most significantly reduced overall productivity in the economy relative to the subject previous period while the maximum value is 16.98 per cent and shows the most significant annual increment in the nation’s productivity. Graphical representation of the data however offers clearer visualization and a better understanding of the trend in Qatari’s gross domestic product growth rate.

Graph 1: Gross domestic product growth rate

The graph shows a general increasing trend in the country’s gross domestic product except in the year 2005 when the growth rate was negative. The growth rate decreased from the year 2000 to the year 2002 when it started to increase up to the year 2005 when it reached about 16 per cent. The volatile trend however continued and the growth rate had an increasing trend by the year 2010.