Using the Ten Principles to Analyze a Challenging Economic Issue

I have selected an article below the paper requirements

You have been provided with an article in This Week in Business News which deals with an economic challenge that interests you. It should be an article from which you learned the most, from which you got an insight that changed your mind, or with which you disagree.

Prepare a paper on this article in which you explain why you chose it. What made this issue important to you?

Then identify which of the Mankiw’s Ten Principles this article relies on. Does this article reject any or all of the Ten Principles?

In your analysis of the article and the Mankiw’s Ten Principles, be sure to rely on at least two high-quality professional or academic articles on the same issue.

This paper must include:

• Your introduction, summary and understanding of the initial article
• A short discussion of your research and conclusions you were able to draw from it.
• An explanation of what you learned and how you will use this new understanding.

Write a two to three (2-3) page paper in which you:

1. Write an introduction for your paper explaining what the topic is, why the topic in the article/video is important to you, and why you think others should try to understand it.
2. Write at least one paragraph summarizing the key points made in the article/video.
3. Identify and explain how Mankiw’s 10 Principles are foundational to the issues discussed in the article/video.
4. Find two other high-quality professional or academic quality articles on the same topic. Identify what these articles contribute to understanding the topic or issue and whether they agree, do not agree, or somewhat agree/disagree with the initial article.
5. Write a conclusion that explains what you learned about the topic and what conclusion you draw from your research on the topic.
6. Use at least two (2) quality resources in this assignment.

Your paper must follow these formatting requirements:

• Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA formatting. Check with your professor for any additional instructions.
• Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

THIS IS THE ARTICLE

U.S. Economy Notches Solid 3% Growth, Despite Hurricanes

GDP growth remained strong in the face of storms that temporarily shuttered major population centers in Texas and Florida

By Josh Mitchell

Updated Oct. 27, 2017 5:42 p.m. ET

The Wall Street Journal

WASHINGTON—The U.S. economy posted its best six-month stretch of growth in three years despite two hurricanes, a sign that it might be breaking out of its long-running slow-growth trend, with the help of soaring stock prices and rising business and consumer confidence.

Gross domestic product, the broadest measure of goods and services produced in the U.S., expanded at a 3% annual rate in the third quarter, the Commerce Department said Friday. That followed 3.1% annual growth in the spring.

Though not a boom, that’s still the first time since mid-2014 that the economy has strung together two quarters of at least 3% growth. Solid spending by consumers and businesses—along with higher sales of American goods overseas—helped prevent the kind of slowdown some economists expected after hurricanes Harvey and Irma shut down parts of Texas and Florida in August and September.

The third-quarter gain came alongside signals that “animal spirits,” as the economist John Maynard Keynes once described the desire to spend and invest, were helping to boost economic activity. Stock-market gains have accelerated since Donald Trump was elected president last year, and both consumer and small-business confidence have notched higher. The Dow Jones Industrial Average rose another 33 points Friday, putting it up 18.4% so far this year.

In the wake of those sentiment advances, household purchases of durable goods, such as cars and refrigerators, have picked up, as have gains in business investment in equipment. Consumer spending on durable goods rose at an 8.3% annual rate in the third quarter after 7.6% annual growth in the previous quarter. Equipment spending by business rose at an annual 8.6%, following 8.8% in the previous quarter.

Kevin Wilson, chief executive and president of Buzz Franchise Brands, a pest-control and home-cleaning company, said higher stocks have led several people to open franchises under his brands this year.

“Good times are here,” he said. “Their stocks have gone up and they’re taking some of that money and saying now’s the opportunity to start our own business.”

Still, there is ample reason for caution before concluding the gains will be sustained. The economy has produced six-month growth bursts several times during this eight-year expansion, including a period of near-5% growth in mid-2014. But it hasn’t been able to keep up that pace. The growth rate as a whole for the expansion has averaged 2.2%.

A chunk of the third quarter’s growth reflected businesses’ replenishing of stockpiles, which had fallen earlier this year, rather than higher sales. Stripping out inventory changes, which can be volatile, output grew at a 2.3% rate, closer to the longer-running average. Compared with a year earlier, overall output including inventory changes was just 2.3% higher.

While economists are expecting growth in the current quarter to clock near 3% again, nagging trends, including an aging population and weak worker productivity gains, still might stand in the way of the country achieving sustained robust economic growth.

“We have to be a little bit careful,” said Gregory Daco, economist at Oxford Economics. “The underlying pace still remains in that 2% growth environment.”

President Donald Trump has promised sustained 3% growth by reducing regulations, revamping trade agreements and passing a broad tax-cut package currently being negotiated in Congress.

Administration officials celebrated the latest numbers. “As the President’s tax-cut plan is implemented, our entire economy will continue to come roaring back,” Commerce Secretary Wilbur Ross said in a statement Friday.

Democrats weren’t prepared to yield any credit to the new administration. “Today’s GDP numbers show the resiliency of the economy this administration inherited,” Sen. Martin Heinrich (D., N.M) said in a statement. “Instead of building on this foundation, President Trump has created a climate of uncertainty.”

Hurricanes made it challenging to discern the underlying trend in the third quarter. Damage to property led to a spurt of spending on cars in hurricane-damaged areas, but the storms also appear to have depressed spending on services like restaurants, where payrolls sank for the month.

The Commerce Department said hurricanes likely suppressed business activity such as oil-and-gas extraction in Texas and agricultural production in Florida. But the storms likely boosted other types of activity, such as emergency services and repair efforts.

“It is not possible to estimate the overall impact of Hurricanes Harvey and Irma on 2017 third-quarter GDP,” the agency said.

Repair efforts could boost economic growth in coming quarters, particularly in building sectors. The Commerce Department estimated that government and private insurance companies’ payouts resulting from the storms could total $102 billion. That’s money that could be plowed back into the economy.

Taken altogether, the report is likely to nudge the Federal Reserve closer to raising its benchmark short-term interest rate—the federal funds rate—at its policy meeting in December. Inflation picked up this summer after weakening earlier in the year, though it remains below the Fed’s 2% target. The price index for personal consumption expenditures—the Fed’s preferred measure of inflation—rose at a 1.5% annual rate in the third quarter, up from the second quarter’s 0.3% increase.

If the economy is going to sustain faster growth, much will depend on the outlook for business investment, which is central to boosting worker productivity and sustaining robust corporate profit gains.

MBAF, a 600-employee accounting and consulting firm in based in Miami, offered a sign that a sustainable pickup is happening. It has budgeted roughly $1 million in capital spending in its current fiscal year—triple the amount it spent last year.

Tony Argiz, the firm’s chief executive and chairman, said the spending increase reflects two developments: New technology has come on the market recently enabling his company to perform audits much more efficiently, and breaches at firms like Equifax are pushing firms like his to invest in new security software.

He said the company feels the urge to become more efficient to compete with other firms. “We need to keep up with the times, and artificial intelligence is going to be critical in my profession in the next four or five years,” Mr. Argiz said.

Write to Josh Mitchell at joshua.mitchell@wsj.com

Corrections & Amplifications

U.S. GDP, when adjusted for inflation and seasonality, rose 2.3% from a year earlier in the third quarter of 2017. A line on a chart in a previous version of this article misstated the GDP-growth level by about 2 percentage points between 1990 and 2017. (Oct. 28)Appeared in the October 28, 2017, print edition as ‘U.S. Economy Picks Up Steam.’