## # 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:
Managers need to know when downturns and upturns in sales will occur. When the economy will accelerate or slow down, and how steep or deep they will be. How long sales will remain in their current state. How pricing will affect sales, and that sales are not fully dependent on the economy. The quality of products, service, and marketing also play major roles. They also need to know when costs are about to rise or fall.
| 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 |
Not every decline in GDP constitutes a recession but recessions are always characterized by a drop in GDP. Small declines in economic growth are usually felt by businesses, but is not a threat of their survival. However, when the economy goes into recession, businesses face risk of extinction. Looking at recessions will help managers to understand outside forces. The length of a recession can vary, but the average is around 11 months. No particular recession is inevitable, but the occurrence of some recession at some time in the next 10 or 20 years does seem inevitable.
Gross Domestic Product
Even though our economy continues to change there are still some commonalities of business cycles. For example, profits have been a lot more unstable compared to production. Corporate profits tend to be more unstable than the overall economy because costs do not change in proportion to sales. Even variable costs are not proportional. In a recession, costs do not change as much as sales, that is why profits declines. # Consumer Spending
Consumer spending is about 2/3 of GDP, so it cannot be too different from GDP. However, GDP swings more up and down. People do not cut back in proportion to their economic downfall, they tend to keep the majority of their spending habits. The most cyclical sector is big-ticket purchases, such as a car. Non-durable goods are the closest thing to being recession-proof.
GDP vs Consumer Spending
GDP vs Consumer Services
GDP vs Consumer Durables
GDP vs Consumer Non-Durables
Construction of houses vary more than the overall economy. Housing has a great variability, such occupants.Housing construction tends to lead the rest of the economy, in both expansions and contractions.
GDP vs Nonresidential Construction
Capital spending is the purchases of plant and equipment. By definition, they will last more than a year. Capital spending has wide changes across the cycle, high increase and big decreases. Usually lag behind the economy, the bigger the item the bigger the lag.
Recessions does not really hurt federal spending. Weak federal spending can cause a recession. Other than that, government spending usually does not correlate with economical cycles. Government spending is strongly affected by the economic state.
Export are relatively unstable, as they depend on a buyer. This leads to big swings but at the same time makes it very uncorrelated to the American economy.
Compared to export, import is much more affected by the American economy. Import also fluctuate more than the other types of domestic spending. Demand is the key for high import.
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.
GDP is the total value of finished goods/services within a country’s boarder.
Explain the term in your own words here.
Nominal GDP is GDP for a time period. Real GDP is nominal GDP adjusted for inflation.
Explain the term in your own words here.
Total value of all finished goods/services produced by a country’s citizen during a year.
Explain the term in your own words here.
A period of temporary economic decline.
Explain the term in your own words here.
Indicators that define what actions need to be taken to achieve your goals with measurable outcomes.
An event that affects a business economic situation.
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.
Was caused by the collapse of the housing market, fueled by low interest rates, easy credit, insufficient regulation, and toxic sub-prime mortgages.
Impacts of the recession was lower fertility rate, historically high levels of student debt, and diminished job prospects among young adults.