According to McConnell, Gross Domestic Product is a measure
of the total marketplace worth of final goods and services produced in a certain
year. The primary objective of the GDP’s calculation is
to determine financial production, and assesses outflows about income, as it is
states in the article “Chapter 5 National Income Accounting: Measuring
Output,” 2007. The article debates fluctuations in Puerto Rico’s economy and the
resolutions diverse writers have suggested. Also, it makes a contrast between
the Puerto Rican and USA GDP and the islands reliance. A breakdown of fiscal growth
discloses that fiscal policies are crucial in the determination of solutions to
economic welfare when referring to nominal and real GDP.
Puerto Rico’s economy
has had numerous defeats since the 1970s, in disparity to rises in the 50s and 60s.
The articles suggest that these downfalls were consequences of US dependency
and poor labor force input. As of 2000, at 31 percent, Puerto Rico had the lowest
employment in the Americas and the Caribbean, as the article “Restoring
Growth in Puerto Rico: The Economic and Policy Challenges”, claims. Additionally, both articles conclude
that the substantial dependence on assistance programs lowered labor rates on
The articles powerfully state that rising
employment is vital to reestablishing economic growth, and, if it is not
accomplished it, it will result in a decrease in GDP for many years. Both
articles compare GDP measurements on the island and in the US. In the United
States, consumption (being two thirds of the GDP) is the key element, investment,
government spending and the net exports (Soto-Class & Lamba-Nieves, 2006). The
process dismisses investment or public sectors inventory variations (University
of Phoenix, 2015). In the same way, Puerto Rico measures for GDP, but they use
the domestic investment factor in a different perception, which is mostly
because fixed domestic investments and inventory fluctuations are provided by
both the private and public areas of the country’s economy.
LaBossiere’s article, “Who Is Responsible for A Living Wage” states: “…either
employers can pay employees enough to live on or the taxpayers will need to
pick up the tab.” The issue is, if Puerto Rican’s employers pay all their
employees a living wage instead of the stablished minimum wage, this could lead
to an even higher unemployment on the island. Since most small business would
not be able to assure many medium salaries; they will employ fewer workers.
This fact could negatively impact the island’s overall economy.
Derek Thompson in his article, “This is the American worker’s saga” says that the
stuff people are making nationally is getting cheaper, but the stuff people
need is getting more expensive. That’s why people in Puerto Rico feel so
squeezed. LaBossiere’s article reflects every aspect of what Thompson
emphasizes in that thought. He makes a clear point that the worker-class
struggles each day more and more to keep up with the essential necessities, but
work much more hours than in previous decades and, paradoxically, live in
desperate poverty. Low income families hardly can pay for the main necessities:
shelter, food, and health care.
The aim of raising employment engagement through
government incentive and fiscal policy is achieved through public transfers
from the USA. These allocations represent 25 percent of the people’s income.
The federally supported Food Stamps Program was introduced in 1975. Soto-Class
& Lamba-Nieves articles’ points out that the way this and other federal
programs were administered produced labor force involvement to falling-off.
One of the articles is about a single
mother with 2 children. Absurdly, it states that if she has $0 income and be
suitable for all transfers, she would earn more in entitlements than if she worked
part time less than twenty hours per week. Also, this mother would only make
$37 per month, which is more than if she worked full time at the established minimum
wage. This example proves the negative consequence that fiscal policy has had
by incentivizing Puerto Ricans to not work.
Growth in Puerto Rico: The Economic and Policy Challenges” also states that the low employment percentage of
Puerto Rican males can be accredited to numerous aspects: exile of extremely
employable applicants to the US for higher salaries, the lucrativeness of disability
coverage and NAP (Nutrition Assistance Program) transfers from the US federal
Furthermore, in the article, “Chapter 5
National Income Accounting: Measuring Output,” a contrast between nominal and
real GDP was not straightway debated; therefore, further revisions where required
to develop a contrast. According to a study made in 2014 by Soto-Rodriguez, the
economic growth in Puerto Rico in the 80’s period had an average GDP of 0.3%. The
GDP percentage is reliable with the verdicts of the Federal Reserve Bank of New
York, which contemplate the 4.8% average inflation percentage for that period. Consequently,
by taking in account the inflation ratio, the percentage in query is the real
GDP and not nominal. The difference between one and the other is that the real Gross
Domestic Product includes the
inflation ratio to find growth and nominal does not take it into consideration.
GDP Growth in the island has endured delayed
since recent years, 2006 according to the inferences of a study made by
Enchautegi and Freeman (2006, 181.) The
economic growth study displays that a diversity of reasons did contribute,
which was that the GNP was raising much less quickly than the GDP and the
employment growth persisted shocking since the year in mention.
conclusion, all articles conclude that consumers will draw on upcoming credit to
support the household income. The income-saving bond in Puerto Rico is moderately
low because 25% of the residents obtain federal funds as particular salary,
which does not allow savings. The
federal funds are the principal reason of the weak workforce input that is
conducive to deprived savings relationships, which develops high interest rates
after customers use credit to compensate the domestic earnings. The multiplier
effect in Puerto Rico alludes to the increase in the final income which ascends
from the outlay of the independent consumption.
Every dollar is spent as a tendency to consume. Hence, consumption will surpass
income for the bottom earning section of the labor force.