Economic Principles and Macroeconomic Indicators - Article Example

Analyzing an Economic Article

Introduction

Macroeconomics is a complex field as it is influenced by many factors. The factors are analyzed using various economic indices which provide detailed information about the overall health of the economy. According to an article in The New York Times, the markets have risen, and unemployment has gone down since President Donald Trump took office in the United States. Therefore, this paper analyzes the article and evaluates it concerning economic principles and macroeconomic indicators.

Economic Principles Related to the Article

One of the economic principles depicted in the article is sometimes the government can improve the outcomes of the market. Even though markets are good at organizing market activities, this principle tends to have important exceptions. The reasons why the government gets involved in the economy is to promote efficiency and equity. The case is portrayed through policies that aim to change how the economic pie is divided or to enlarge the pie. This principle, thus, relates to the article as the article states that the stock market has been booming since President Trump was elected. According to the article, when Trump came to power, deregulations in the market took place as well as actions on tax policy and infrastructure spending. These changes, therefore, helped to propel the market higher. Moreover, investors have become enthusiastic concerning a lighter regulatory touch made by the new administration of President Trump.

Another principle depicted in the article is, in a short-run, there is a tradeoff between unemployment and inflation. This principle holds that over a period of few years, the majority of the economic policies executed tend to push unemployment and inflation in opposite directions. The scenario arises due to the slow adjustments of some prices. The article states that unemployment rate has declined since the election of President Trump. However, other economic indicators like wages and price of commodities have barely budged. As a result, inflation has not reduced since the prices of goods and services have not changed.

Additionally, the principle, a nation’s standards of living depend on its capability to produce goods and services also relates to the article. The article suggests that the Gross Domestic Product growth is still the same as it was before the election of President Trump. Besides, the article reports that the economy of the United States has expanded since the elections. This suggests that the ability of United States to produce goods and services has improved which has then resulted in the improvement of living standards of its citizens.

Macroeconomic Indices

Various economic indices can be identified in the article. The indices include Gross Domestic Product (GDP), labor force participation rate, and unemployment rate. The GDP is the aggregate value of all services and goods generated by all companies and people in a country regardless of whether the companies are foreign or the individuals are citizens during a particular time (Mankiw, 2015). Basically, if the companies or the individuals are located within the boundaries of the country, the government includes their production in the GDP. Gross Domestic Product is made of government spending, business investments, personal consumption expenditures, and the difference between exports and imports. GDP is however affected by factors such as political interference. The growth rate of GDP is measured by determining the percentage increase in GDP from one-quarter to another. The GDP growth rate is used to show how fast the economy of a country is growing.

The unemployment rate is the segment of the labor force which is jobless (Strawser, 2013). This indicator normally fluctuates due to changing economic conditions. For instance, when the economy becomes unhealthy, jobs also become scarce, which results in the rise of the unemployment rate. On the other side, when the economy becomes healthy, jobs become plenty which in turn reduces the unemployment rate. Furthermore, in regards to the unemployment rate, unemployed people are defined as the individuals who are available and willing to work and who have actively sought work but have not been successful. The unemployment rate is obtained when the number of employed people is dived by the sum of people in the labor force. Noteworthy, the unemployment rate undergoes seasonal adjustments to account for predictable variations such as extra hiring during holidays.

The labor force participation rate refers to the ratio of the segment of the economy’s labor force that is active. Basically, it is the number of individuals who are enthusiastically looking for jobs or are already employed. Individuals who excluded from labor participation rate include students, the disabled who cannot attend to work, retirees, incarcerated, as well as people who do not want to work.

Indices about the Article

GDP is the primary indicator of the economic health of a country. In the article, it is noted that GDP growth rate is much similar to how it was before President Trump was elected. However, in the second quarter, the economy had expanded at a rate of 2.6 percent ((Parlapiano, Schwartz & Yourish, 2017). The scenario, therefore, means that the economic health of the United States is becoming healthier. Besides, as the article states that the markets have risen and unemployment has declined, the stable rate of GDP growth can be related to the situation. Since the GDP growth rate has not declined, production of goods and services have also not declined which has resulted in the markets performing well. Additionally, the situation depicts that more people have been able to be employed in companies which have also contributed to the stable production of services and goods.

According to the article, the unemployment rate has declined. This means that majority of the jobless people in the United States’ economy have managed to get jobs. However, the decline in the unemployment rate can reflect some other factors which have also been captured in the article to get an accurate view of the economy. For instance, despite the fall in the unemployment rate, other economic indicators such as wages and home prices have barely changed. One of the reasons as to why such a situation occurs is that many workers left the work force during and after the recession, causing the labor force participation to drastically fall. Therefore, since labor force always grows faster than the addition of job s in the economy, the decline in the unemployment rate cannot actually reflect a positive economy (Zin, 2013).

After the drastic fall in labor participation rate due to the recession, little has changed since President Trump took office (Parlapiano, Schwartz & Yourish, 2017). There have been slight improvements in the labor force participation rate, which implies that the economy has slightly improved. Moreover, the situation can be related to the decline in unemployment rate. The creation of jobs has resulted in the decline in the unemployment rate which in turn has enabled the labor force participation rate to increase.

It is thus evident that the economic indices displayed by the article impact each other in various ways. For instance, since unemployment affects the output of an economy, the decrease in unemployment rate thus results in an increase of GDP (Mosikari, 2013). Also, unemployment rate and labor force participation rate affect each other directly. For instance, when analyzing unemployment rate, it is important to consider the labor force participation rate since individuals categorized as unemployed might not be active participants in the labor force. Additionally, when the unemployment rate falls as a result of people giving up on finding jobs, the labor force participation rate also falls. However, if the unemployment rate falls as result of people getting employed, labor force participation rate increases.

Evaluation, Decisions, and Forecasts from the Article

In regards to the article, it can be said that the economy of the United States has improved after President Trump took office. The health of the economy is thus becoming better as depicted by the rising stock market, and the decline in unemployment rate. However, wages have not changed despite the increase in employment and the rising of markets. It is thus necessary for the government and employers to increase the wages to attract more employees. Furthermore, the stock market is projected to rise further due to the deregulations that have been executed and the changes in tax policy and infrastructure spending. Also, it can be projected that in future, it would be easy for citizens to find employment since the unemployment rate is decreasing.

Conclusion

The New York Time’s article suggests that the markets have risen and unemployment has reduced since President Trump took office relates to various economic principles. The principles depicted in the article include the government can improve the outcomes of the market, in a short-run, there is a tradeoff between unemployment and inflation, and a nation’s standards of living relies on its capability to produce services and goods. Furthermore, displays several macroeconomic indices which include Gross Domestic Product, labor force participation rate, and unemployment rate. From the article, it can be said that the United States’ economy is healthy since there is an increase in GDP, and the unemployment rate has declined. Moreover, it is projected that there would be easy for citizens to find employment in future since the unemployment rate continues to decline.