Abstract
The purpose of this paper is to measure behavior of the U.S. economic growth and views the future from 2015-2035 while pretending that the financial crisis did not happen. The sample period for investigation in 1945-2015 the empirical analysis of this study employed annual secondary time series data, collected from different sources. Three influential factors of growth are the labor force, technology, and capital, and our most important finding is that growth of technology is the highest influential among them and thus special attention should be given its advancement. The growth rate of GDP is at 2.07% as of 2015, but using the first order exponential model, it will slow down to 1.38% by 2035. The findings were conclusive in that total production was made up of 57.5% technology, 28.8% labor, and 12.8% capital. Technology makes up the greatest fraction of total production and changes in labor and capital would not affect the growth rate as much as technology can and it was projected that in 20 years, the GDP level could be anywhere from $19,138.8 using the polynomial model to $34,681.8 using the first order exponential model. The longest business cycle the U.S. has experienced was from 1989-2008, under which the economy had its longest stretch of better than experience performance. Growth gradually accelerated after 1950, reached a peak in the middle of the 20th century, and has been slowing down since. The most effective way to increase the growth rate is to increase the level of technology because the diminishing returns to labor and capital decrease the growth rate of GDP. A key idea to take away from this paper is that while a model fit the current data well, it may weigh recent events to heavily, recessionary or exponential growth, the average between the most optimistic and pessimistic models may be the best bet.
Highlights
The U.S Economy has been going through many ups and downs in recent history and the economy was very sluggish during recession period
Using real Gross Domestic Product (GDP) the U.S economy has increased its annual production of goods and services more than 811.74% from 1948
Real GDP will be used throughout this paper as measure of the U.S Economy
Summary
The U.S Economy has been going through many ups and downs in recent history and the economy was very sluggish during recession period. The continued strength and vitality of the U.S economy continue to astonish economic forecasters. In this view, technology is profoundly altering the nature of business, leading to permanently higher productivity growth throughout the economy. Skeptics remain arguing that the recent success reflects a series of favorable, but temporary, shocks. This argument is buttressed by the view that the U.S economy. Productivity growth, capital accumulation, and the impact of technology were topics once reserved for academic debates, but the recent success of the U.S economy has moved them into popular discussion. More generally, knowledge capital should be such an important driver of modern economic growth is hardly surprising, given the evidence from everyday life and the results of basic intertemporal economic theory
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