Wealth in American hit its highest level ever last year, according to new data released by the Federal Reserve. The net worth of U.S. household and nonprofit organizations rose to $80.7 trillion, according to the report. The data from 2000 to 2013 are shown in the figure below (from The Wall Street Journal).
The report also shows that the ratio of debt-to-personal disposable income has declined, homeowners’ equity in real estate as a share of real-estate values has increased, and mortgage borrowing continues to decline on an annual basis. Each is shown in the figure below (from The Wall Street Journal).
1) Discuss how the increase net wealth is distributed among Americans.
2) Discuss how a lower ratio of debt-to-personal disposable income might lead to a boost in future consumer spending.
The Congressional Budget Office (CBO) decreased its forecast of U.S. potential GDP on February 28. Click here to read the report.
As a result, the U.S. output gap—the difference between potential and actual GDP—is now $754 billion, according to the CBO. See the figure below.
Although the output gap is now smaller than before the revision, it remains quite large. The most immediate problem with a large output gap is that it leaves too many people unemployed.
How do we close the output gap? Faster economic growth. However, over the next decade, the CBO forecasts that the U.S. economy will not reach the new lower level of potential GDP.
Apparently, the Great Recession might have done permanent damage to the U.S. Economy.
1) What is potential GDP? How is it defined?
2) The output gap is now smaller than previously thought. Discuss how this change might influence fiscal policy and monetary policy.
Washington DC’s Case-Shiller housing price index (HPI) from 1987 to December 2013 is shown in the figure below.
Washington’s pre-recession housing market peak was in 2006. Similar to the rest of the U.S., Washington’s housing market declined after 2006 and it has subsequently recovered.
If the Washington housing market is split into thirds, the pattern observed is similar to that of other U.S. housing markets: relative to the high and middle tiers, the low tier experienced the greatest decline after the housing bust and is now experiencing the strongest growth rate.
1) The top third of Washington’s housing market—the high tier segment—reached a maximum value of 224.13 in March 2006. The high tier declined 24 percent to reach its lowest HPI value of 170.36 in April 2009. As of December 2013, this segment of Washington’s housing market has increased 17.1 percent from its 2009 low.
2) The middle third of Washington’s housing market—the middle tier segment—reached a maximum value of 260.46 in February 2006. The middle tier declined 36 percent to reach its lowest HPI value of 166.76 in May 2009. As of December 2013, this segment of Washington’s housing market has increased 23.4 percent from its 2009 low.
3) The bottom third of Washington’s housing market—the low tier segment—reached a maximum value of 295.36 in June 2006. The low tier declined 45.3 percent to reach its lowest HPI value of 161.58 in May 2009. As of December 2013, this segment of the Washington’s housing market has increased 26.9 percent from its 2009 low.
Why does one job pay more than another job? The answer: supply and demand. The interaction of supply and demand in a specific labor market determines the market wage. So, before you progress too far in your academic career, it might be worth your while to take a peek at the equilibrium wage of a major that interests you. Although money is not everything, it certainly helps to pay the bills.
Click here to see the starting and mid-career salaries for college majors, according to Payscale.com’s 2013-2014 College Salary Report.
Discuss the differences in the starting salaries for criminal justice majors and chemical engineering majors. Explain why is there a difference in starting salaries between the two majors?