Before discussing about the state of the American economy that is booming, recovery, or recession, we must know in advance the understanding of these three things. First is the boom, when the economy is booming, GDP, income, and productivity will increase. In addition, an increase in the number of consumer demand can also cause the economy to boom. If GDP becomes positive, then there will be many other factors that will be positive. However, boom economics can lead to inflation, poor investment, and increasing debt.
After that recession economics is a condition when GDP has decreased or real growth is negative for two quarters or more in one year. Recession can reduce economic activity such as employment, investment, and corporate profits. And the last is the economic recovery. Economic recovery is a condition in which the economy starts to recover is marked by an increase in the amount of production and consumption, GDP, employment field, corporate profits, and other indicators.
After knowing this, of course, a country has experienced these three problems, one of them America. America has experienced a very big recession so-called “Great Recession” and this happened for 10 years, namely 1929-1939. Let us first focus on the state of the economy in 2016. By 2016 it can be said that America is experiencing an economic recession. This is evidenced by the rise in the inflation rate is quite fast. Inflation began to increase in August to December 2016. In addition, in the second quarter of 2016, GDP declined, but in the next quarter increased.
Besides these two factors, this can be seen from the level of unemployment and interest rates at the time. In 2016, it can be said that his unemployment rate is quite high. This suggests that the amount of unemployment in America at that time is very much. When viewed from aggregate demand, aggregate demand will decrease because the consumer has a low income so that the level of public consumption will be low. When aggregate demand is down and aggregate supply is stable, it makes the price level decrease and the quantity of supply decreases as well. But the consumer can borrow money from the bank.
Before the consumer wants to borrow money from the bank, they should see the interest rate given by the bank. By 2016, interest rates in America can be said to be low. The decrease in interest rates can increase aggregate demand. If this happens on an ongoing basis, then inflation will occur and the US economy will experience a recession.
For the next, let discuss the state of the American economy in 2017. In this year, the inflation rate in America has decreased but, in July to September has increased, then in October decreased again. But, the inflation rate in October is still high. My opinion said that the American economy is currently undergoing a recession. Although GDP has improved significantly over the past few quarters and the unemployment rate has also declined, we still cannot say that there is an economic recovery.
We also have to pay attention to other indicators, for example, the level of public consumption and interest rates. Indeed, in the year, 2017 interest rates have increased, but whether the level of consumption decreased? Not really. The number of unemployed is reduced, meaning many people have jobs. When a person has income, they will always consume a good or service. When viewed from the aggregate demand and aggregate supply charts, this will lead to an increase in the rate of inflation again. However, when viewed from the other side of the economy, this can help the American economy grow. If the amount of public consumption is large, it will increase the per capita income of a country and the economy of the country will experience growth.
So the conclusion of all this is that we cannot see whether a country’s economy is booming, recovery, or recession from only a few indicators. However, we also have to pay attention to other indicators that are also related to economic problems.
