Reference no: EM131166512

Assessing Macroeconomic Performance

According to the business cycle dating committee of the National Bureau of Economic Research (NBER), the U.S. economy entered into a recession (now dubbed the 2007-2009 recession) in December 2007. By the time that the NBER made its announcement in late 2008, that “news” came as a shock to no one. Virtually everyone (including the NBER) had already known for months that the economy was sick. In fact, one was hearing words such as “crisis,” “meltdown,” and even “depression” at least as frequently as mere “recession.” That recession ended, again according to the NBER, in June 2009. That announcement, on the other hand, did come as a surprise to many, since so many Americans said the economy felt like it was still in a recession. Officially, the 2007-2009 recession was only an 18 month ordeal. But was it really?

Even today, some seven years after the recession was declared to be officially ended, opinions still are divided—largely along political affiliation lines—regarding the degree to which the economy has recovered, and how well the economy is currently performing. Depending on the “news” source and/or political party affiliation of the reporter/speaker, one might conclude that the U.S. economy is still in the throes of stagnation, recession, anemic/jobless recovery (you pick the descriptor) the likes of which Americans have not seen since the Great Depression--or else that the economy has largely if not fully recovered and moving steadily in the right direction.

Relevance side note: One thing is clear. If policy makers don’t know where the economy is today, that casts serious doubt on the usefulness of our forecasts of where the economy will be next month, next quarter, and next year. And when one considers that countercyclical policy-making invariably involves time lags, both before and after the policy action is taken, it becomes obvious that policy-makers very much need to know where the economy is, and where it’s headed. Otherwise, their actions have as good a chance of making matters worse as making things better. Ignorance is not bliss!  

Given that the ubiquitous assessments/opinions/pipedreams offered by politicians and pundits often are less than totally objective (or honest), a person really needs to have some knowledge base on which to judge for himself/herself the health of the economy, whether it is performing as it should, and whether it is headed in the right direction. One of the objectives of this course is to help you to develop some knowledge and skills in that regard.

Your Project 1 assignment has to do with how one should go about assessing the performance of the U.S. economy. You are being asked to identify specific metrics or measuring sticks that you believe should be noted and/or analyzed in order to arrive at an accurate reading of how the economy is doing and where it is headed. (Note: You are not being asked at this point to assess the performance of the economy. Rather, you are being asked to consider the process (focusing on the appropriate variables-metrics-measuring sticks) involved in arriving at such an assessment.

Specifically, you are to identify no more than six metrics that you would use to assess the performance of the economy. For each of the six selected metrics, explain why you chose it and how you would use it. Please do not exceed 1000 words.