## # 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:A manager needs to know about the fluctuations that are happening inside their business. They need to know when the downturns and upturns in their sales are coming, how steep the increase or decrease will be, what their market is trending towards and the trends of all the other markets. They need to know the predicted future for their business. They should know when the prices of their products or services are going to increase or decrease. Interest rates are very important for managers because they play a role in financial strategy.
| 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 |
The economy has a strong history with recessions and each one of them has let economists understand them better. Recessions are random and are typically caused by something that has happened or is happening in the world or country. Recessions, on average, last about a year but can be shorter or longer. A cool stat I saw was that from 1950 - 2000 there has been a 25% decrease in recessions from the time periods of 1850 - 1900 and 1900 - 1950. Recessions are inevitable but with the research we have gained we can predict them and prepare.
Gross Domestic Product
Looking at profits across the economic cycle it is known that they are much more unstable than overall production. A mild recession can send a company out of business due to the severity it can have on the companies profits. This is tragic to a company because in a recession sales fall higher than costs. This can in-turn mean good for a company if the economy starts doing well the profits boost exponentially.
Consumer services are the most stable parts of the economy. If the consumer is having a down year income wise they still need things like food, a house or apartment to live in, wifi and telephone, etc. These consumer services are necessary for most peoples lives and that’s why they are so stable in the economy. Consumers are seen buying durable goods when the economy is doing good, but are seen buying non durable goods during both good and bad times of the economy.
GDP vs Consumer Spending
GDP vs Consumer Services
GDP vs Consumer Durables
GDP vs Consumer Non-Durables
Housing construction is one of the most volatile sectors of the economy. Housing is typically the leading indicator of the economy. When housing is doing poor the economy soon follows and when the economy starts to regain footing the housing construction booms.
GDP vs Nonresidential Construction
Capital spending is business purchases of plant and equipment and will last for a year or longer. Capital spending will typically lag behind the overall business cycle. This lag can be on both the downside and the upside. The construction side of capital spending tends to have longer lags than the equipment side of things. Capital spending is very volatile.
Government spending is typically not correlated with the economic cycles. This is due to the fact that the federal government can run on a deficit unlike the state and local government. State and local government is affected by the economy strongly. Local government is just restricted far more than the federal government on what they can and cannot change speding wise.
Exports are right in the middle regarding volatility. The US has more imports than exports but still export more than 1 trillion worth. Exports display huge swings, but are not strongly correlated to the economic cycle.
Imports have a high rate of fluctuation. This is due to most imports being durable goods such as vehicles and not non durable goods such as housing and health care. American businesses import a lot of equipment which is one of the reasons why we have more imports than exports. It is more important businesses to look at what the goods represent than the fact that they were imported.
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:
Represents the total monetary value of all goods and services produced inside of a country during a 1 year time period.
Nominal GDP is the total value of all goods and services produced in a certain time period. Nominal GDP is the measurement of growth and production without any effects due to inflation.
GNP is the total value of finished goods and services produced by a country citizens in a given financial year.
Recession is a period of temporary economic decline during which trade and industrial activity are reduced.
Leading indicators are measurable or observable variables of interest that predicts a change or movement in another data series, process, or trend of interest before it occurs.
In 2007 the US faced one of the worst economic declines in its history. The collapse of the housing market which was fueled by low interest rates, easy credit, insufficient regulation, and toxic subprime mortgages. Once the recession hit several large financial firms experienced financial distress and financial markets experienced signifigant turbulance. This recession lasted till 2009 and effected the US population greatly. It created unemployment which created several more outcomes for the health and financial state of US citizens.