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Econ103 Finalpaper

1427 words - 6 pages

The article I found describes the issue that the middle class in America is no longer the world’s richest, and compares this issue with other advanced countries. It states that in recent years, middle class families in America were receiving meager raised income than counterparts were around the world, and most of American families were receiving unequally income. Those income data were analyzed by LIS, a group that maintains the Luxembourg Income Study Databases, and by The Upshot, a New York Times website covering policy and politics, and also reviewed by outside-academic economists. The United States used to be a leader of after-tax middle-class income country among all the ...view middle of the document...

Therefore, when GDP is divided by capital would only show an average production level of the whole country but could not clearly analyze each class level. Median per capita income was $18,700 in the United States in 2010. Professor Katz, an outside economist, claimed that median per capita income in the United States in 2010 had no change since 2000 even after inflation. However, in Britain, Netherland, and Canada, there were about twenty percent rising in income level. In the graph 9, the line of Canada even has intercepted the line of American in recent years. The other countries, like Norway, Sweden, and Netherlands, the slopes of their lines are steeper than the line of America’s, though they had not catch up with the U.S.’ line yet. LIS believes that these countries will surpass the United States soon. Most of countries in this graph had increased income after inflation, but America did not have explicit increasing. It is an abnormal phenomenon, because inflation always has a positive relationship with income. As graph 1,2,3, inflation would cause price level increase. When price level increases, people’s purchasing ability will decrease, so the money demand will increase. In the Money Market, increasing money demand would cause increasing in interest rates (Graph 1). In the Planned Investment and the Interest Rate Function, increasing interest rate will lead to decreasing in planned investments (Graph 2). In the Aggregate Output curve, decreasing planned investment cause decreasing in aggregate expenditure and then cause decreasing in the total output (Graph 3). When output is decreasing, our income will be reduced. If people have less money than before, they would buy less. Nonetheless, in order to balance the long-run economy growth, federal government should increase income so that GDP pre capita and CPI (Consumer Price Index) can be balanced. The consumer price index is a price index computed each month by the Bureau of Labor Statistics using a bundle that is meant to represent the “market basket” purchased monthly by the typical urban consumer. In this article, however, the United States middle-class citizen did not receive more income after the inflation. This is the crucial evidence, which shows that the middle-class in America is not the richest now.
The article demonstrates three broad factors, which drive the weak income performance in the United States. Education is the first reason, because companies need employees with high education degrees to use high technological production tools, which will effectively improve the aggregate supply. Increasing in aggregate supply can raise total output (Graph 4). According to the data, Americans between 55 and 65 years old have much more literacy, numeracy and technology skills than Americans who age between 16 and 24, and even are above average relative level of the people in rest of the industrialized world. If young adults do not have high-tech skills, it will negatively influence the...

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