## # A tibble: 1,096 x 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:
Managers of businesses need to know how their sales are going right now, but also what is going to happen, both if their sales are going to increase or decrease, but also how much the increase/decrease is Managers must also know everything about their products, especially the quality How their business markets their product. Managers must also have an insight in the economy in the area where they are marketing their product, because if the economy is on it’s way up, they might want to increase their price, and the opposite way around if their is a decrease in the economy. *How their own business is doing financially.
| 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 |
Gross Domestic Product
Declines in economic growth of 1 or 2 percentage points are usually felt by businesses, but they don’t threaten survival. Recessions happen occasionally, but not on any fixed schedule, and one of the worst was a couple years before 1960. Recessions average a little less than a year of duration, but sometimes they are shorter or even longer. No particular recession is inevitable, and it is hard to say when these will happen, but the occurence of some recession at some time in the next 10 or 20 years does seem inevitable.
The economy continues to change, so specific episodes vary from one to another, but some commonalties of business cycles persist. It is important to examine the volatility of the lines. Which variable has higher highs and lower lows, and which variable is more stable? It is also important to study the timing of change. Profits fluctuate more than the overall economy, on both the upside and the downside. *In a recession, costs do not fall as much as sales fall, so profits decline.
GDP vs Consumer Spending
GDP and consumer spending varied a lot from 1950-1850. but from then and until now it has been pretty stable with some ups and downs. The highest GDP and consumer spending were in the early 1950’s, while the lowest was around 1955 and 1983. The more stable GDP and consumer spending in recent years might be a result of pretty stable economy. GDP and consumer spending go hand in hand because consumer spending accounts for about two-thirds off GDP. However, consumer spendings don’t go as much up and down as GDP.
GDP vs Consumer Services
This chart is about GDP and services. While the GDP went very much up and down during these years, services did not vary as much, but we can still see a clear trend that services follow the same trend as GDP. Services don’t vary as much because people in general are in need of different services no matter if they are extremely rich or poor. A lot of services are fixed costs, which means not dependent on the stock market. *Consumer services is the most stable part of the economy
GDP vs Consumer Durables
A person with a bonus or unusually large sales commission is more likely to spend the windfall on a car, boat, or vacation than to buy more food and electricity. People tend to postpone or downsize purchases on furniture and home electronics in a recession. Consumer durables are the goods that last more than a year. Consumer spending on durable goods, especially big-ticket discretionary purchases, is a highly cyclical sector.
GDP vs Consumer Non-Durables
Nondurable consumer goods like food, paper products, gasoline, and clothing all have intermediate volatility. Consumer spending on nondurable goods is a more stable than the overall economy, but not enough to be considered recession-proof.
GDP vs Nonresidential Construction
Housing construction is one of the most volatile sectors of the economy. Housing construction tends to lead the rest of the economy, in both expansions and constractions. *Construction of new housing varies far more widely than does the overall economy.
Business purchase of plant and equipment are called capital spending. Capital assets, by definition, will last a year or more. Business capital spending is very volatile. *It lags behind the overall economic cycle, with especially long lags for large, big-ticket items with long lead times, such as office buildings and airplanes.
Some businesses sell to the government. They will find that federal purchasing varies somewhat more than does the overall economy but that is not always correlated with the economy. Wars can make federal spendings go bonkers. Most federal nondefense spending is fairly stable, but program-level spending has substansial ups and downs. State and local government spending is more stable than average, but it is still somewhat sensitive to the economy. *Spending changes are lagged relative to the overall economic cycle.
Exports are relatively volatile. They are more stable than housing or captial spending but less stable than consumer or government spending. Exports and imports have grown faster than any of the major components of domestic spending. Exports display large swings, but they are not strongly correlated with the American economic cycle. Exports may be totally impervious to a decline in the US economy if the American decline does not spread to foreign countries.
We import plenty of the goods in our most volatile sector of consumer spending, which is durable goods, such as cars and electronic equipment. American businesses import much equipment. For a business importing good into the US, it is more important to look at the type of spending that the goods represent, rather than the fact that they are imported. Demand for imports varies with the underlying domestic demand for hat type of 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:
This is the total monetary value of goods produced and srvices provided in a country throughout a given period of time, which might be a quarter or a year.
Nominal GDP relfects the raw numbers in current dollars and is unadjusted for inflation. On the other hand, real GDP adjusts the numbers by fixing currency value, and also eliminating any distortion which is caused by inflation or deflation.
This is the total value of all goods provided and services produced by a country’s citizens in a given financial year (quarterly, fiscal, normal year), irresepctive of their location.
A recession is a significant decline in economic activity that affects several parts of the economy and lasts longer than just a few months. An example is the global recession of the 2008 financial crisis.
A leading indicator is an economic indicator, such as corporate profits or stock prices, that usually shows a change in direction before a corresponding change in the state of the economy.
The Great Recession lasted from December 2007-June 2009, and this economic downturn was the longest since the second World War. The Great Recession was notably severe in several aspects. Real GDP fell 4.3% from its peak in 2007Q4 to 2009Q2. The unemployment rate, which was 5% in December 2007, rose to 9.5% in June 2009, and peaked at 10% in October 2009. The financial impacts of the Great Recession were similarly outsized: Home prices fell approximately $69 trillion in 2007 to $55 trillion in 2009. The causes of the Great Recession were the collapse of the housing market, fueled by low interest rates, easy credit, insufficient regulation, and toxic subprime mortgages. Some of the other impacts of the Great Recession in the US were lower fertility rates, historically high student debts, and diminished job prospects among young adults. I would say that all these impacts are an obvious impact, but it shows how much economy affects our lives.