U.S. Economic Performance in the late 1990's

Essay by justinh8University, Master'sA, November 2008

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1.How do you explain the remarkably strong performance of the U.S. economy during the late 1990s?There were three main factors that contributed towards the booming U.S. economy during the late 1990s: technological innovation, organizational changes in business, and public policy. During the late 1990s, the U.S. economy experienced a tremendous growth in productivity, especially in the use of information technology (IT). This growth gave a boost to the economy and living standards in the U.S. Labor productivity was enhanced by the use of IT capital throughout the economy, in areas such as computer hardware, software, and communications equipment. As part of this "New Economy," there was a combination of entrepreneurship and the Internet that allowed companies to achieve very efficient business models. Entrepreneurs implemented changes in business organizations, reconfigured their existing businesses and started new ones. There seemed to be a driving force behind this economy where people aimed for efficiency, which helped to hold prices down and kept inflation pretty much non-existent.

The strong economic growth gave people a positive outlook, which led to a boost in investment spending as well. Incomes were on the rise, and so was the standard of living. As interest rates and unemployment fell, it made it so much easier for people to finance all different kinds of activities. Low interest rates helped keep the stock market strong, allowing companies to lower their cost of capital. During the late 1990s, strong investment led to rapid growth, and fewer savings needed to go towards financing the public debt. The Clinton administration implemented policies and strategies that were based on fiscal discipline. Investment was made in people and technologies, and markets were opened up both at home and abroad. An institutional framework was developed that supported global integration. This new environment that...