Saturday, December 01, 2007

America's Ridiculously Large Economy II

According to the BEA, the U.S. economy grew by almost 6% (in current dollars) in the third quarter, and by 6.6% in the second quarter (on an annualized basis). In dollar terms, that translates into $200 billion of additional economic output in the third quarter of 2007 (or $800 billion on an annual basis) and $217 billion in the second quarter ($868 billion annually).

This brings up the question: Given the ridiculously large size of the U.S. economy ($14 trillion), what does each percent in nominal GDP growth translate to, in terms of that amount of additional U.S. economic output compared to the size of various national economies? Here is how it breaks down:

1% of current-dollar annual growth in U.S. GDP ($140 billion) would be the equivalent of adding the entire economies of either the Czech Republic ($142b) or Israel ($142b) to the U.S. economy.

2% growth would be like adding Denmark's entire economy ($276b) to the U.S.

3% growth would be like adding more than Turkey's entire economy ($401b) to the U.S.

4% growth would be almost like adding the entire Dutch economy ($660b) to the U.S.

5% growth would be almost like adding the entire economy of Australia ($755b) to the U.S.


6% growth would be like adding Mexico's economy ($840b) to the U.S.

7% growth would be like adding Russia's entire economy ($985b) to the U.S.

Bottom Line: Over the last year, from the third quarter of 2006 to the third quarter of 2007, the U.S. economy has grown by 5.3% (same as the 10-year average), or more than $700 billion in current dollars, which is almost the equivalent of adding the entire national economy of Australia ($755b) to the U.S. economy. And if the economy were to grow annually at the same rate as the second quarter (6.6%), it would be like adding more than the entire economy of Mexico to the U.S. economy, and almost like adding the entire Russian economy to the U.S.

A slowdown in the U.S. economy to something like 2-4% growth in nominal GDP would mean that instead of increasing output equivalent to adding the economies of Australia or Mexico to the U.S. economy in a given year, we would have to "settle" for only adding output equivalent to an economy like Netherlands, Turkey or Denmark. Still not a bad outcome for the "Dangerfield Economy."

2 Comments:

At 12/01/2007 6:01 PM, Blogger J.R. Gawel said...

In your opinion, would you say that there are any downsides to this increased growth? The figures that you have presented appear to indicate a positive situation, but what does it all mean in terms of the big picture, and for our country’s future (surely the figures don’t tell the whole story…) Also, how long do you think this growth will last?
--curious student

 
At 12/02/2007 11:40 PM, Blogger Dr. Ashish Manohar Urkude said...

Dear Professor Mark J. Perry,
That's great comparison; we enjoyed your article especially 1%, 2%, 3% up to 7% comparison and adding Economies to USA economies. In fact with that comparison more than 80% Economies if put into the Weighing machine on one side still USA will weigh more than them on other side. Thus, till date, USA is really a giant economy......
Dr. Ashish Manohar Urkude, Professor, Alliance Business School, Bangalore, India.
http://www.managementengineering.blogspot.com/

 

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