Economic Indicators Flashcards
What are economic indicators?
Piece of economic data (usally macroeconomic scale) that is used by analysts to interpret current or future investment possibilities to judge overall health of an economy.
What are the 9 main economic indicators?
Gross domestic product, Interest rate, Inflation, Unemployment rate, Level of foreign debt, balance of trade, stock market, price of crude oil, and consumer price index (CPI)
What is gross domestic product (GDP)?
The value of all goods and services produced I one nation in one year. All about the value of what they are making. Eg. Canada GDP looks at all the value of goods and services (factories, haircuts, restaurants, etc).
*Wants to see growth overtime
*Tends to shrink during big recessions
*Bad when comparing countries
What should be used when comparing the GDP of countries?
GDP per capata.
GDP/population
What is Interest Rate?
Helps a country grow or slow down. Government controls the borrowing rate, which impact/controls disposable income, helps the balance of payment, etc. Banks raise the interest given by the government in order to make money.
Fixed VS Variable Intrest VS Compound Interest
Variable Interest rate: moves constantly depending on periodic changes
Fixed Interest: Remains the same for the life of the loan
Compound Interest: Bank charges interest on interest
Why does the government raise interest?
Increase in interest causes people to not buy/use disposable income, there for prices lower, and there for interest is lowered to entice people to buy more.
What is inflation?
The overall price increases across a nation making the cost of living increase on a whole.
The value of money decreases due to inflation.
Slow rate of inflation around 2% a year is good as it shows that money is being spent and the economy is doing well.
How is unemployment caused?
Caused when companies are not making enough money and have to lay off workers. Common in communist nations. This is a problem as there are not enough people to support the economy and can create a snowball effect.
What is a manageable percent of unemployment and how can the government help?
4, 5, 6% of unemployment is manageable over 10% is not good.
Government can help:
financial support
lower interest
stimulate the economy (build roads, offer deals, etc)
*impacts the balance of payment as they have to put out money
What is level of foreign debt?
How much debt does a nation have.
What is balance of trade?
The balance of how much exports and imports a nation has. Countries want more exports as it shows they are making money and strong.
About stock market index
Look at a companies index (safe way to invest). Index is a collection of companies and their overall value. It shows the countries performance. If the top companies of a country are doing well, that is a good sign.
Why is the price of crude oil important?
It is connected to everything (gas, oil prices). Can cause snowball effect. The higher the price, the less disposable income people will have.
Impacts businesses relying on transportation (groceries will go up due to the cost to transport)
What is consumer price index (CPI)
Looks at the basket of goods (eggs, milk, Big Mac) of a nation and compares them. Looks at cost of living.
