1980s US Economy: Recession, Bankruptcies, and Struggling Farmers.

The early 1980s in the US economy were ushered by suffering through a deep recession, as businesses bankruptcies sharply rose as compared to the 1970s. Even though the 1980s economy shows a promising future to the entire economic growth of the nation, most of the businesses were not spared by the recessing economy. Farmers also faced their share of suffering from economic difficulties, as agricultural exports declined sharply. Moreover, falling crop prices and increased interest rates added to the agony of the economy, as normal civilians remained in the harm's way. Even though the late 1970s economy recession had widely affected the early 1980s economy, by 1983, the economy had rebounded and enjoyed a sustained period of growth, as annual inflation rates remained under 5% (Davis, et al., 2019). The economic disorder experienced in the 1970s lingered to the beginning of 1980s, a state that left the economic oppression to the hands of Reagan's economic program, that soon revamped declining economy. Therefore, this essay seeks to critically elucidate on the US 1980s economic growth, and factors that affected the economy.

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GDP

Gross Domestic Production (GDP) is the total market or total monetary value of all the finished goods and services, a country produces within a specified given period (Davis, et al., 2019). GDP plays a vital role in the economic development of a country, with more emphasis paid on the improvement of technology, capital investment, and health to increase the GDP of a nation. Moreover, skills of the employees, which constitutes the human resources, play a vital role in the GDP development of a nation. The modern American earns eight times more than what a normal American earned in early 1900. The improvement in technology, fast-growing healthcare system, and capital investment have been among the concepts that have improved the American GDP. Even though the American GDP, has improved significantly, during the 1980s, the nation, battled to improve the economic growth, through improving its GDP, to help reshape the dying economy.

According to Da Fonseca, (2018), GDP is calculated on an annual basis or even sometimes calculated in quartile basis. The US releases an annualized GDP estimate for every fiscal quarter, as well as the calendar year. In the US, the Bureau of Economic Analysis (BEA), relies heavily on the data collected from retailers, survey builders, and manufactures through assessing the trade flow to help calculate the GDP.

What Impacted The US Economy in The 1980s As Bjornland, et al., (2018) outlined, the early 1980s recession begun in July 1981, ending in November 1982, as a result of the Federal Reserve's Contractionary Monetary Policy, which sought to remedy the prolonged recession. The 1973 oil crisis and the 1979 energy crisis afflicted the economy, flexing its muscle to the mid of 1980s. The prolonged economic recessions' effects begun to unveil, as long-term effects such as the Latin American debt crisis and Savings and loans crisis became apparent. The US GDP was hit servilely, as capital investment reduced, especially between early and mid-1980s.

Unemployment and Inflation

The working-age population comprises of a given age factor, in the production sector that comprises the labor force and those who are not in the labor force. On the one hand, the labor force includes two distinctive sections, which consists of the employed and the unemployed population. The two sides, make a decisive role in the GDP growth of a nation since the country's economic growth highly depends on the productivity of the working labor force. On the other hand, the not in labor force comprises of distinctive two sides, which includes the retired, and the full-time students, who are not working but comprise to the working-age population. Additionally, not in the labor force, also comprises of the available for work but not currently working population, which also affects the GDP growth of a nation.

The available but not working population is further broken down into two distinctive sections, which help understand the nature of the working-age population. In this section, discouraged workers, and not working because of children or other associated problems, also contribute to the labor workforce population. Therefore, using these variables, it is essential to measure the three most essential labor statistics, unemployment rate, labor force participation rate, and unemployment-population ratio.

2219325116205Work-age Population

Work-age Population

3190875292100

27908252583180Discouraged workers

Discouraged workers

47339252365375Not currently looking for work because of childcare responsibilities or other problems

0Not currently looking for work because of childcare responsibilities or other problems

40100252602230430720520669250034956751068705Available for work but not currently working

0Available for work but not currently working

54768751184275Not available for work (retired, students)

0Not available for work (retired, students)

46958251592580511429064008000266700165100Labor force

0Labor force

452437559055Not in labor force

Not in labor force

1781175394335001038225973455714375184023015144751602105Unemployed

Unemployed

-7429501592580Employed

Employed

The calculation of unemployment within a nation is calculated taking into consideration a diverse range of variables, which helps to scale down the working-age, by breaking it down into minute fragments that can be easily analyzed and assess per component. Therefore, this helps reduce the possibilities of calculating shortcomings, when measuring unemployment within a given country.

During the 1980s economic growth, higher levels of unemployment were witnessed, especially during the early stages of the decade. Both public and privet sectors felt the unemployment heat, as more jobs were lost, forcing the unemployment workforce to increase. Even though the economy was still molding itself from the previous crisis that was experienced in the 70s, little investment to create jobs were futile. On the contrary, the unemployed population was severely affected based on different criteria, such as education level, ethnicity, and skills in the job industry.

Unemployment in the early 1980s, begun taking a different toll, as the rates of unemployment begun proliferating. By April 1980, the US experienced a sharp jump from 5.6% in 1979, to 6.9% in April 1980 (Davis, et al., 2019). Never the less, the conditions, were far worse, as, by May 1980, the nation had recorded a 7.5%, unemployment, in the workforce population. Economic recession contributed to the increase in unemployment, with education level, skills and experience coming into play. As a result, most of the affected population were the African, Americans, Latin, and Hispanic population, who faced the real consequences of economic recession during the 1980s.

Employees with high school education qualification faced the threat of unemployment, with 38% chances of unemployment. Employees, with a college degree, had 18% chances of unemployment, while those who did not complete high school facing 44% chances of unemployment.

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Figure 2

The down of 1982 came with its challenges, adding up to the increasing rate of unemployment across the nation., as states compete in the growing unemployment. Michigan recorded the highest percentage of unemployment with more than 13.8%, with Alabama following the lead with 13.5%, and West Virginia was sealing the top three unemployed states with 13.0%. Never the less, the peak of nationwide unemployment was more than 10.3% by the end of 1982 (Da Fonseca, 2018).

Interest Rates

During early 1980s, the Federal Funds Rate recorded a higher rate interest, which affected the performance of many organizations within the US region. Moreover, this reduced trade and export, among many manufacturing firms, due to lack of investment, and increased cost of operations. According to Da Fonseca, (2018), interest rates have a direct effect on the economic growth of a nation. For instance, during early 1980, the interest rates were higher, which limited the possibilities of higher investment, as lenders will expect a higher return rate from the borrowed amount. Therefore, this discouraged investment, which ushered in more saving. Never the less, this attracted foreign funds, aiming to gain a higher interest return from the higher interest rates from the Federal Funds Rate.

Figure 3

How Would These Fluctuations Affect/Be Affected by Inflation?

Federal Funds Rate has a direct impact on economic growth, as they play a decisive role in ensuring that the government can stabilize prices and lower interest rates for higher investment. Reduced interest rates have a direct expansion of businesses and economic growth. On the contrary, the contraction monetary concept helps to stabilize the prices within the economy. Therefore, monetary policy plays a vital role in economic growth and development.

How Would Investments and Foreign Trade Rates Increase or Decrease

The Federal Funds Rate, posed a significant threat to the general growth of the American economy during the 1980s, as higher interest rates discouraged borrowing, and higher investment, but encouraged saving. Therefore, those willing to expand their businesses were cut-off and discouraged by higher interest rates. However, the expansionary monitory policy paved the way for the economy to regain. The concept of low-interest rates reduces the value of interest, encouraging investors to borrow more at a lower rate. Most of the businesses took advantage of this concept to help rectify their economic position, as this allowed them to invest more, reduce unemployment and continue meeting the trade demands, which helped revive trade, and increased exports.

The monitory policy helped to increase business performance in the US, as cash flow in the economy is well controlled to help the economy to recover from the recession. On the contrary, the monitory policy helped to stabilize prices, which helped many firms to benefit from what they manufacture fully. The concept of contraction monetary supply played a vital role, where the government reduced the financial circulation in the economy, to help obtain a long-run aggregate supply.

Foreign Trade: Imports and Exports

The 1980s economy was marked with a lower import and export, as the country produced less, due to lack of proper capital investment in many businesses. As a result, the export percentage declined, especially during the early 1980s, as unemployment took a higher toll. Even though the concept of monetary policy was highly applicable, to help raise the value of a dollar, both imports and exports remained to be relatively lower. However, towards the mid of 1980s to early 1990s, both imports and exports appeared to have increased, as the monitory policy came into play to help boost the development of the economy.

Higher Federal Funds Rate in the early 1980s strengthened the dollar, making it possible for the government to import at a reduced cost. However, this did not help improve the situation, as more domestic firms remained to struggle, as others were forced to lay-off employees to reduce the cost of operation. Never the less, monitory policy changed foreign trade. The employment of low-interest rates, in 1986, made it easier for many firms in use to expand, by using the low interests to expand their businesses (Da Fonseca, 2018). Therefore, this gave rise to exportation and importation power.

Foreign Trade: Models

Aggregate demand (AD) and Aggregate Supply (AS) affect price level microeconomics equilibrium real GDP, which includes both short-run aggreg...