Low inflation, low interest rates, low unemployment, and the consequent solid economic growth is the result of a gradual and credible disinflationary policy. To the extent governmental policy action has produced this benign set of circumstances, excellent monetary policy is the key reason. Real GDP 2.9 2.5 2.4 2.7 Inflation 1.3 1.4 1.7 1.8 I. Output Measures GDP Click here to see Figure 1. It followed a lengthy expansion in the 1980s, which lasted 92 months and is the second longest peacetime expansion on record. In sum, during the last 15 years not only did we experience the two longest peacetime expansions in U.S. history, but the only recession we had during these 15 years was remarkably short and mild.
Latest data indicate that real GDP continues to expand at a healthy pace.
Real GDP grew at a 6.0 percent annualized rate in the fourth quarter. Both the consumption and investment components of real GDP have been leading sectors in this expansion. Note that the left axis pertains to consumption growth while the right axis pertains to the growth of investment. Government Spending Click here to see Figure 4. An important reason for this has been the cutbacks in defense spending.