Gross Domestic Product (GDP) is the most well-known of all macroeconomic measures. As shown in this book, economists think about GDP in many different ways and all recognize it has its flaws. Year over year percentage changes in GDP are used to track cyclical GDP growth. Drops in GDP growth or recessions are observed to be cyclical. High growth or boom periods occur at regular intervals.
Students are reminded that booms are both good news and bad news. The good news includes rising employment, more income, and even more taxes for government spending. The bad news is that booms are associated with bubbles and when they burst recessions follows. So a fundamental question is – can an economy slow down in a boom to offset a bubble bursting in a year? So far, only China has shown its willingness to take such a prescriptive action. GDP is shown to be an aggregate of many different components. These include consumption, investment, government expenditures, and exports. Movements in all of the GDP components contribute to the realized GDP growth. Economists also convert annual GDP data to “real” GDP data and introduce “multipliers” or accelerators to do analysis. With emerging age demographics, off-shore investment by U.S. companies, government sequestration and debt crisis worries, a big concern is that future real GDP growth in the U.S. and EU will be determined by how much exports can be increased. Across nations, China, India, Brazil and other transitioning and emerging countries have high real GDP growth rates compared to the U.S. and EU. Within the next two decades the largest current economies will be minimized and new leaders will take their place. The U.S. will not be the largest economy in the world. Now is the time to ask how will business decisions change when the U.S. is number two or three? Although economics is often called the “dismal science,” this book reminds us that economics is really the messenger, not the cause, of bad news. Fiscal and monetary stimulation, pubic debt management, rising pensions, global business practices, spiraling social costs, and lower tax payments have been tracked by economists for many years. Historically, crises are allowed to form and solutions are left to political leaders. The pattern will continue until businesses learn to disrupt crises before they occur. It’s time to begin. About the Author Dr. Atwater has been teaching macroeconomics at the Graziadio School of Business and Management at Pepperdine University in Malibu, California since 1995. He has also given numerous macroeconomic seminars to corporations, faculty and practitioners including Nestlé USA, the Billion Dollar Club, the Academy of Economics and Finance, the National Association of Manufacturers, and the World Demographics Conference on Ageing. Dr. Atwater won the 2010 George Award for Outstanding Faculty Member. The business experiences he brings to the classroom include serving as chief executive for a Southern California technology company, the chief financial officer of an international, value-added software company, a principal in the human resources and compensation practice at William H. Mercer, and a director and cofounder of several start-up companies. He has created decision-support technologies and implemented them in a number of Fortune 100 companies, including AT&T, Intel, Dell Computer, Apple Computer, BHP Minerals, IBM, Bank of America, Nestlé, and Nestlé USA. Dr. Atwater earned his AB degree in mathematics, his MA degree in mathematical economics, and his C Phil and PhD degrees in economics from the University of California, Los Angeles.