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Long Term Economic Outlook

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Discuss long-term economic outlook for the following countries;
United States, Western Europe, Japan, Asia ex-Japan, and Latin America and include views on GDP, inflation, interest rates, currencies, and U.S. monetary policy.

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Solution Summary

This solution explains long term economic outlook for some important countries. The sources used are also included in the solution.

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Step 1
Over the long term, the US real GDP is forecasted to increase by 3.26 percent per annum to reach $33.34 trillion in 2040. The US monetary policy is expected to increase the interest rates till the Fed rate of 4% is reached. The monetary policy will control the effects of inflation and between 2012 and 2040 the long run inflation rate is expected to be 1.4% (a)(b).

Step 2
Japan's economy is marked by economic growth but by smaller amounts. The GDP in 2012 is $5.96 trillion, the GDP growth is 0.9%. Primary balance and current account deficit outlook is poor. The long term forecast is a growth of 1.5% GDP. The current inflation rate is 0.3% and in the long term will increase to 0.8%. The benchmark interest rate of Bank of Japan is 0.1 percent. The average for last forty years is 3.21 percent. The average long term interest rate is expected to average 2.6 percent. The long term trend is that the Japanese Yen is declining against the US dollar(c) (d).

Step 3
The economy of Asian countries, non-Japan is showing signs of improving. The GDP growth rate in the long run is expected to be above 5%. The ...

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