## # 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 |
Gross Domestic Product
A vital piece of information that I gathered through this reading was that profits fluctuate more than the overall economy, and it is on both the upside and downside. Since the last section was about recession, I found this little blurb to be interesting “In a recession, costs do not fall as much as sales fall, so profits decline” (Page 19). I find this sentence to make 100% sense, I’ve just never thought about it until I read it.
While reading this section I found out that consumer services are the most stable part of the economy, which is really interesting to think about. Throughout this section there are lots of charts and data to prove how consumer spending really impacts the economy. But the last thing I want to mention is how consumer spending on non-durable goods is more stable than the economy, but not enough to be considered recession proof. What I take away from this is that non-durable goods make tons of money yearly, but it is not the driving factor for an economies success. I could be wrong saying that though.
GDP vs Consumer Spending
GDP vs Consumer Services
GDP vs Consumer Durables
GDP vs Consumer Non-Durables
There is a lot to take away from this little section on housing. I like one of the key points that’s brought up at the end of the section that says “housing construction tends to lead the rest of the economy, in both expansions and contractions” (Page 26). I also liked the idea of housing being almost the first sector to recover after a recession has occured.
GDP vs Nonresidential Construction
Right from the start of this section you find out that capital spending is seemingly very volatile. Also when tracking the economic cycle capital spending lags behind, especially with bigger items such as an office building or airplane.
Going into this section I was interested to find out how the government spending would correlate into the economic cycle, but sadly they do not correlate with one another. While reading I did find out that certain things are paid for by local governments, like the highway funds for example.
I found the chart of GDP and Exports to be quite fascinating. There is a lot to see visually which makes it harder to follow along with, but it still gives it’s information as to how GDP and Exports don’t exactly go hand and hand. Exports do display large swings and aren’t usually correlated with the American economic cycle.
The imports chart is similar to the exports chart. Both seem to vary and don’t have any real concise pattern between them. Just as you would think, demand for imports varies with the underlying domestic demand for that type of good or service.
Explain 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:
The total value of goods produced and services provided in a country during one year
Real GDP is a more accurate reflection of the output of an economy than nominal GDP. Nominal GDP reflects the raw numbers in current dollars that are not adjusted for inflation.
The total value of goods produced and services provided by a country during one year, equal to the gross domestic product plus the net income from foreign investments (with help of Oxford Dictionary).
a time of economic decline where trade and industrial activity are reduced.
A leading indicator is any measurable or observable variable of interest that predicts a change or movement in another data series, process, trend, or other phenomenon of interest before it occurs (Investopedia).
the transfer of control of an economic resource from one party to another party.
Also known as the subprime mortgage crisis. Started in December of 2007 and lasted until June 2009, which means it extended for a 19 month period. There was a combination of banks unable to provide funds to businesses, and homeowners paying down debt rather than borrowing and spending.