ECO 561 Week 5 Learning Team Deliverable

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Each team member should discuss at least one economic indicator and discuss it with their team then prepare a 1400 word paper discussing how each indicator works together to affect how companies make business decisions. Discuss how some promote economic activity and how others make economic decisions less attractive

Description

ECO 561 Week 5 Learning Team Deliverable

Learning Team Deliverable

Introduction

The nation’s economy can be redefined by statistics and data reports; specifically economic indicators.  Economic indicators allow economists and others (private, public, non-profit agencies) to analyze the health of the economy.  The applicable agency releases the corresponding reports on daily, monthly, or quarterly schedule. Furthermore, the various types of indicators are classified by timing or direction in relation to business cycles. Because of the vast amount of data available, it is important to understand which one are necessary for a particular study; indicators are only helpful if they are used or interpreted correctly. This paper will list some ofthe top reports used in a business analyst, discuss its relevance in decision-making and the economy.

GDP

One of the most common indicators is the Gross Domestic Product (GDP).  It is the primary measure of a nation’s performance; peruses annual total outputs of goods and services (McConnell, Brue & Flynn, 2009).To measure GDP all of the spending on final goods and services are summed upevery quarter or year. The items include personal consumption, gross private domestic investments, government purchases, and net exports (McConnell, Brue & Flynn, 2009).GDP is a goodestimator for profit growth and in determining the expected rate of return on capital.The Federal Reserve uses the data to adjust monetary policies. For example,the Federal Reserve reduced the federal fund rates to nearly zero percent, and implemented different programs to support the liquidity of banks to aid in improving the financial market.

The graph below depicts a quarter to quarter change in real GDP (2013-2014).As illustrated, the first quarter of 2014 real Gross Domestic Product for the United States dropped by 2.9%. This decline was compared to the fourth quarter of 2013 when the real GDP grew about 2.6%. Within this timeframe, the prices paid by U.S residents increased by 1.3%, and personal consumption only increased by 1% compared to 3.3% in the fourth quarter. Sharf (2014) commented that this was the worst GDP reading since the 2009 recession. The bad weather during the first part of the year had a substantial impact on the decline in the GDP, putting a stop to production, construction, exports and lower local government spending. However, the second quarter data have been showing growth in the GDP numbers which may be a sign that the economy may be rebounding from the hard winter. So far home sales, auto sales and construction have been improving (Sharf, 2014).   Understanding the breakdown of GDP and how it impacts the economy could help individuals in business and in investing when making financial decisions. Declining GDP means the economy is weakening and in this case individuals are not spending, and people may be losing jobs, which will cause a negative impact on the economy. On the other hand a straightening economy means there is an increase in GDP, spending and this will drive employment up because companies will have to meet the production.

 

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