Unit 11 - Economic Indicators Flashcards
This is the study of supply and demand
Economics
When people want to buy an item that is in short supply, the item’s price
Rises
When people do not want to buy an item that is in plentiful supply, the price
Declines
A national annual economic output- all the good and services produced within the nation - is know as its
Gross Domestic Product (GDP)
The United States ____ includes personal consumption, government spending, gross private investment, foreign investment, and net exports. It counts all activity that occurs within the confines of the nations boundaries, even if the activity if generated by a foreign entity.
GDP
In the United States, when are GDPs released?
Quarterly by the Commerce Department
The most prominent measure of general prices changes is the
Consumer Price Index (CPI)
This measures the rate of increase or decrease in a broad range of consumer prices, such as food, housing, transportation, medical care, clothing, electricity, entertainment and services.
CPI
When is the CPI computed?
Each month
The GDP figures reflect
Actual growth
When analysts use the CPI to account for changes in the costs of goods to adjust for inflation or deflation, this is called
The real GDP and it is a constant dollar (inflation adjusted) measurement.
The term ___ ____ ____ is sometimes used for CPI.
Constant dollar measurement
This is based not on the activity that occurs within the country but on the activity of the citizens and entities of the nation, wherever it may occur. It is published by the Commerce Department on a quarterly basis.
Gross National Product (GNP)
These are indicators that tend to change direction ahead of the overall economy.
Leading indicators
The following list are example of what indicators?
- Money supply
- Building permits
- Average weekly initial claims for state unemployment compensation
- Average work week in manufacturing
- New orders for consumer good
- Machine tool orders
- Changes in inventories of durable goods
- Changes in sensitive materials prices
- Stock prices
- Changes in business and consumer borrowing
Leading Indicators
These indicators change direction along with the economy as a whole. Because these indicators are often published after the time period has passed, they are good confirmation tools of the leading indicators.
Coincident Indicators
The following list are examples of what indicators?
- Number of hours worked
- Employment levels
- Nonagricultural employment
- Personal income
- Industrial production
- Manufacturing and trade sales
- GDP
Coincident Indicators
These indicators change after the economy has begun a new trend but serve as confirmation of the new trend. It helps analysts differentiate long term trends from short term reversals that occur in any trend.
Lagging Indicators
The following list are examples of what indicators?
- Corporate profits
- Average duration of unemployment
- Labor cost per unit of output
- Ratio of inventories to sales
- Commercial and industrial loans outstanding
- Ratio of consumer installment credit to personal income
Lagging Indicators
The indicator used to measure price movements is
CPI
____ is the general increase in prices.
Inflation
____ ____ can encourage economic growth because gradually increasing prices tend to stimulate business investments.
Mild Inflation
___ ___ reduces a dollar’s buying power, which hurts the economy.
High Inflation
_____ is the general decline in prices. It usually occurs during severe recessions when unemployment is on the rise.
Deflation
This refers to prolonged periods of slow or little economic growth, accompanies by high unemployment.
Stagnation
This pace of inflation is extremely high and accelerating. This severely erodes the purchasing power of a currency. Investors often move cash away from the nation and the currency experiencing it, worsening the devaluation of the currency. This is a very rare occurrence.
Hyperinflation
This is the term used to describe the unusual combination of inflation (a rise in prices) and high unemployment. Generally occurs when the economy isn’t growing and there is a lack of consumer demand and business activity, but prices for good are still rising. Inflation does not need to be high, just present, along with high unemployment.
Stagflation
