Essay Example on First part of the chapter is about the production Growth

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First part of the chapter is about the production growth rates in world economy some progressive economies and other countries since 2000 From 2000 to 2007 the world economy had a permanent dissemination Annual average world output growth was 3 2 with about 30 richest group of countries in the world with progressive economy and other about 150 countries with start up and evolving economy In 2007 signs of the expansions ending started to appear U S housing prices started declining since 2000 because they had doubled Optimists believed that lowering housing prices might take them to lowering housing construction and to lower consumers spendings the Federal Reserve Board U S central bank could lower interest rates to induce demand and escape recession Pessimists believed that interest rates being decreased might not be enough to induce demand and that the United States will go through a short recession Housing prices continued declining it became clear that given mortgage loans at the time of the expansion were of low quality 



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Many of the borrowers took too big loan and were not able to carry through mortgage payments With declining housing costs the estimation of their mortgage frequently surpassed the cost of the house giving them a motivating force to default The banks that had issued the mortgages had regularly packaged and bundled them together into new securities and after that sold these securities to different banks and speculators This complication and ambiguity turned a housing cost decline into a great financial crisis an expansion that very few economists had predicted Not being able to see the quality of having the assets on other banks balance sheets banks turned out to be afraid to lend each other because they feared the bank will not have it repaid to them It is said that in September of 2008 a major bank Lehman Brothers went bankrupt Because the connections between Lehman and other banks were so dense many other banks were about to go bankrupt as well Financial crisis turned into big economic crisis Hit by the decreasing housing costs and the crash in stock prices and afraid that it may be the new Great Depression people cut their consumptions The U S government had cut taxes and increased spending demand and output decreased The U S crisis quickly became world crisis and other countries also got affected through two channels First is trade As U S consumers and firms cut spending part of the decrease fell on imports of foreign goods Second is financial U S banks needed funds badly for the United States and took back funds from foreign banks which made problems for them also

The result was also a world recession By 2009 average growth in progressive economies was 3 7 it was the minimum annual growth rate from the last Great Depression Growth in start up and evolving economies stayed positive however it was almost 4 percentage points lower than the average from 2000 until 2007 The second part is about U S economy Some informations from the text The United States are very large with an output of 14 7 trillion in 2010 accounting for 23 of the world output In economic way of looking the U S is the biggest country in the world Standards in the United States are also very high Per person output is 47 300 In 2007 right before the big expansion economists felt that the U S economy is growing Since 2000 economy growth rate was 2 6 a bit lower than previous 20 years but still high for the progressive country Then crisis command in 2008 and output did not grow it declined by 3 5 in 2009 Unemployment increased to almost 10 The most genuine macroeconomic issue confronting the United States was the large budget deficit Third part is about Euro Area In 1957 six European countries formed a European market an monetary zone where people and goods can move freely Today is known as European Union In 1999 EU decided to replace each countries national currency to one common currency called Euro Euro area is a strong economic power However it says that Its output is nearly equal to the U S output and standard of living is not far behind the States From 2000 to 2007 in the pre crisis period Euro area was not doing much in comparison to the U S Output growth was lower unemployment was higher inflation was lower Euro area was a slowly developing economy with high unemployment The fourth part of the chapter is about Chinese economy It is one of the most powerful economies in the world Population of China is four times bigger than the United States but its output is less than half of the U S and output per person is one tenth of the United States Rich countries like United States and poor countries like China cannot be compared because expenses in countries are not the same For example from the text the price of an average meal in New York City is about 20 dollars the price of an average restaurant meal in Beijing is 25 yuans or at the currency exchange rate about 4 dollars For three decades China's growth has gone up rapidly


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