## # A tibble: 1,096 × 5
## # Groups: symbol [8]
## symbol date price change text
## <chr> <date> <dbl> <dbl> <glue>
## 1 GDPC1 1947-01-01 2034. NA 1947.1,
## Growth: NA
## 2 GDPC1 1947-04-01 2029. -0.00267 1947.2,
## Growth: -0.3%
## 3 GDPC1 1947-07-01 2025. -0.00207 1947.3,
## Growth: -0.2%
## 4 GDPC1 1947-10-01 2057. 0.0156 1947.4,
## Growth: 1.6%
## 5 GDPC1 1948-01-01 2087. 0.0150 1948.1,
## Growth: 1.5%
## 6 GDPC1 1948-04-01 2122. 0.0165 1948.2,
## Growth: 1.7%
## 7 GDPC1 1948-07-01 2134. 0.00573 1948.3,
## Growth: 0.6%
## 8 GDPC1 1948-10-01 2136. 0.00112 1948.4,
## Growth: 0.1%
## 9 GDPC1 1949-01-01 2107. -0.0138 1949.1,
## Growth: -1.4%
## 10 GDPC1 1949-04-01 2100. -0.00341 1949.2,
## Growth: -0.3%
## # … with 1,086 more rowsManagers need to know:
| your customers/products | magnitude of spending changes | timing of spending changes |
|---|---|---|
| consumer services | very stable | coincident with GDP |
| consumer nondurables | stable | coincident with GDP |
| consumer durables | volatile | coincident with GDP |
| housing construction | very volatile | leads fluctuations in GDP |
| capital spending | very volatile | lags fluctuations in GDP |
| govt. spending, federal | moderate | not always corr. with GDP |
| govt. spending, state & local | stable | lags fluctuations in GDP |
| exports | volatile | not corr. with GDP |
| imports | volatile | varies depending on product |
A recession is announced once there is a significant drop in sales, employment, and production that also has the effect of spreading to the rest of the economy. This is determined by looking at Gross domestic product which is the market value of goods and services produced within the United States. Using GDP as a general outlook on how the economy is currently you can determine how well the economy is doing and when there might possibly be a recession. Using the information in the text you can determine that over the years the recession length and the # of recessions has dramatically lowered. I believe the main reason is because of the improvements in economics. Also this trend may be seen because of the shift away from goods to services. This would be because service businesses are more stable.
Gross Domestic Product
When looking at profits throughout the economic cycle it is seen that they are very volatile. Small changes in GDP by economist can lead to a major decline in a businesses profits or a major incline in profits. This can be seen through chart 2.2 where the slightest decline in GDP towards the end of 1950 caused a massive decline in real corporate profits.
The relation to GDP and consumer spending is much closer. This makes consumer spending much less volatile to the effects of the economy. This makes consumer services one of the most stable parts of the economy. This can especially be seen in chart 2.3 where the graphs lines are very close together and only show minor differences compared to the real GDP.
GDP vs Consumer Spending
GDP vs Consumer Services
GDP vs Consumer Durables
GDP vs Consumer Non-Durables
GDP vs Nonresidential Construction
Capital spending is seen as purchases of plant and equipment. Capital spending is also a very volatile sector of the economy. Capital spending is seen as a lagging indicator since it tends to show delayed movement compared to the economy. This is very important for those selling the equipment to these companies since they should be expecting to see there sector follow behind the real GDP.
Usually federal government spending does not follow the economic cycles. This is since the federal government can run on a deficit. While state and local government spending is effected by the economic cycle much more drastically. This is due to more restrictions in local government on where they can and cannot change where they are spending money. Another effect is that government spending can lag behind the economic cycle.
Exports are seen as being very volatile to GDP but, at the same time more stable than housing or capital spending. Although exports are very different from other economic sectors since many times when GDP goes down exports stays up. This can be because if the places companies are sending these exports aren’t effected by our GDP or aren’t seeing the same effects this can cause exports to not be effected. This causes big swings, but makes exports not correlate with the American economic cycle.
Imports are very active sector that fluctuates often than exports. Imported goods are mainly volatile because we don’t import the things on which our spending is very stable. But, many times when looking at the correlation of imports to GDP the type of spending that will occur needs to be accounted for since imports aren’t calculated into GDP since they weren’t made in our country. This means that the need for certain imports vary based on the domestic demand for a good or service.
Explan each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the term in your own words here. Calculates the total value of finished goods and services that are sold and made in the US, not including imports.
Explain the term in your own words here. Nominal GDP is calculated by adding together the value of all goods and services produced in a certain time period. While real GDP is the same thing but, inflation is factored into the equation.
Explain the term in your own words here. How much all the finished goods and services owned by a countries citizens, no matter whether they came from that country or not.
Explain the term in your own words here. A recession is when one sector of the economy starts to decline causing decline to start in all the other sectors
Explain the term in your own words here. A leading Indicator refers to when a sector of the economy tends to foreshadow GDP or increase or decrease before GDP does.
Describe the event in your own words here. Include its causes and impacts on the economy and society. You may Google it and find information on the Web.
In 2007 a Great depression was caused due to the collapse of the housing market because of low interest rates, easy credit, insufficient regulation, and bad sub prime mortgages. This caused the stock market to crash, unemployment to rise, and Americans lost $9.8 trillion dollars in wealth. This hurt many because now with no job or there life savings devalued many were greatly financially. This caused high stress in society and effected people for many years after with poor health outcomes, declines in children academic achievement and educational attainment, delays in age of marriage, and changes in household structure.