Measuring Economic Health Memo

Measuring Economic Health Memo

Cruz Villalobos

ECO/212

September 23, 2010

Sherine El Hag

Measuring Economic Health Memo

Economic health is best understood by learning the importance of gross domestic product (GDP) to measure the business cycle, the roles of the government bodies that determine national fiscal policies, and the effect the fiscal policies have on the economy’s production and employment industry. The decision the government makes regarding taxes and spending will have either a positive or negative effect in the economy’s production and employment industry. Economic health is of extremely importance to the nation’s well being.

Gross Domestic Product (GDP)

Economists measure total production in a country by using gross domestic product (GDP). GDP is the market value of all final goods and services produced in a country, typically in one-year (Hubbard & O'Brien, 2010). GDP consist of four components that are personal consumption expenditures, investments, government consumption, and net exports. The business cycle has four phases’ peak, expansion, trough, and recession. The United States economic growth decreased for two consecutive quarters and that cost the nation’s economy to enter into a recession. GDP is important when understanding the economy’s business cycle because it helps economists determine where the nation is currently in and the potential long-run economic growth.

National Fiscal Policies

In the United States, the president and Congress work together and determine the next year’s fiscal policies. The president first proposes a budget to Congress for the following fiscal year. Congress then will discuss and develop a budget resolution for the fiscal policies. Fiscal policies are the government’s policies on taxation and expenditures. The expenditures of these funds will provide goods and services for the constituents and that spending will have a direct impact on the economy. This spending...