Essay on Examining US Aggregate Demand & Supply and Policy Impacts (1990s-2000)

The 10-year historical period I selected is between the 1990s to 2000. Therefore, the purpose of the paper is to analyze aggregate demand and supply during the 1990s until 2000 and the policy implemented by the federal government of the United States of America and the impacts resulted during the period.

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The United States has experienced both up and down in terms of economic stability that led to changes in national gross domestic products and change of living standard. For instance, during the 1990s to 2000, the national economic productivity growth increased to 2.5% in the second half of the decade compared to 1.5% during the first half of the decade(Weller,2002).

The economic acceleration experienced between 1991 to 1995 as a result of the implementation of Clintonomics retrospective economic policy that focused on progressive income distribution and environmental support. The approach promoted social welfare reforms, corporate responsibilities, trade, human resource development, and deficit reductions rather than aggressive private and public investment that contributed to the great recession in previous decades, such as 1929 to 1939.

The economic policy framework supported private investment, such as IT investment of which grew from 3% gross domestic product(GDP) at the start of 1991 to 4.9% at the end of the 2000s (Weller,2002). The period between the 1990s and 2000s was one of the great decades when the United States of America experienced extraordinary economic recovery growth after the cold war and great recession occasions.

The rate of income grew as a result of the improvement of the employment sector that lead to faster wage growth among the households leading to an increased level of consumption between 1997 to 1999 that was driven by the rapid increase in stock prices. It leads to aggregate demand for labor and other services

The run-up in market stock prices and services lead to a sharp decline in the stock market value as a result of the wealth effect (Shah et al.,2017). By the end of the 2000s, most of the households in the United States of America researched historical consumer burden since most of the population highly depended on consumer debt, which again affected national GDP. The demand at the household level was strong, leading to soaring of imports. At the same time, demand in neighboring was sluggish, leading to low per capita GDP in most trading partners resulting in an economic deficit.

Conclusion

In conclusion, autonomous expenditure upsurges or declines affecting critical elements of the economy such as employment, investments leading to new policy implementation to mitigate the situation. The aggregate supply and demand approach plays an essential role in the determination of total demand and supply for economic stability by showing how demand and supply relate at the macroeconomic level, which determines the real gross domestic product (GDP) of a country over a given period.

References

Shah, A. B., Shaikh, M., Khoso, G., Shaikh, F., & Shar, Q. (2017). Econometric Analysis Aggregate Demand and Supply Shocks on Output in Pakistan. International Journal of Management Sciences and Business Research, 6(4). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2968268

Weller, C. (2002). Learning lessons from the 1990s: Long-term growth prospects for the US. The New Economy, 9(1). https://www.epi.org/publication/webfeatures_viewpoints_l-t_growth_lessons/