The primary of GDP
Main measure of economic activity
8% compounded annual growth since about 1960
In 2015, an accounting gimmick gave Ireland a
... [Show More] 26% growth rate in GDP. what does this event reflect about the nature of GDP?
-Because the GDP is official, its numbers are not subject to interpretation.
-Governments are required to change GDP calculations every five years.
-Inputs to GD{ are all qualitative, not quantitative
-If the measurement of economic activity evolves, GDP can change.
If the measurement of economic activity evolves, GDP can change
Essential economic indicators
-Economic growth
-Inflation
-Unemployment
-Business confidence
-Housing
Economic growth
-Measured by GDP
- GDP = C + I + G + (X-M)
- ECST function to see breakdown
Consider the GDP formula. A country is undergoing a boom in consumption of domestic and foreign luxury goods. In one year, the dollar growth in imports is greater than the dollar growth in domestic consumption. Assuming all else equal, what happened to GDP?
-There is not enough info to tell
-It went down
-Stayed the same
-It went up
It went down.
Inflation
Nominal GDP growth - inflation = real GDP growth
Inflation erodes the value of bonds. Fixed income chairs utilize bonds.
...
Inflation
a general increase in prices and fall in the purchasing value of money.
Where does one find inflation?
Quarterly GDP report: the whole economy is the data input, the inflation source is the GDP price deflator.
Monthly CPI: Bureau of labor of statistics posts it, the data input is a average basket of goods and services, and the inflation source is the labor departments inflation report.
Unemployment
Measures the number of people who are able to work, but do not have a job during a period of time.
In the U.S. why is there a strong relationship between unemployment and GDP?
-As the economy booms, private investment, government spending, and net exports will cause GDP to rise, leading to unemployment.
-Consumer spending accounts for two-thirds of the US economy. When the number of unemployed consumers rises, there is less consumer spending.
-As the U.S. is a net exporter, exports go down when workers are unemployed. This is because there are fewer workers manufacturing products for the global markets.
-In the US, government spending accounts for 17% of GDP. When unemployment rises, governments spend more on unemployment benefits. Therefore, GDP rises.
Consumer spending accounts for two-thirds of the U.S. economy. When the number of unemployed consumers rises, there is less consumer spending.
Which of the following lines is the best leading economic indicator?
-Nonfarm payrolls
-PMI
-Real GDP growth
-U.S. auto sales
PMI
GDP per capita is a measure of prosperity because it divides the total GDP of a country by its population. Which of the below forecasts for a country would result in the highest GDP per capita growth.
An increase of 2% in GDP and a population growth of 0%.
(Want to find biggest difference in GPD to pop growth)
What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at the onset of a recession in the United States?
Nonfarm payrolls go DOWN, the PMI indicator goes DOWN, the housing starts goes UP.
The primary of GDP
-Real GDP growth is the main gauge of economic health.
-Economic growth is cyclical, with a series of booms and busts.
-Investors interpret the economy through economic indicators.
-Leading indicators attract the most investor interest.
WECO function
Shows you all economic releases of the world through the year.
Which of the following qualities of economic indicators do investors prize the most?
-Sample size
-Government source
-Timeliness of release
-Rigor
Timeliness of release [Show Less]