## # 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 rows

Chater Openning Questions

Managers need to know:

Solution

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

Historical Experience

Recessions happen occasionally, but not on any fixed schedule. Recessions average just less than a year of duration, but they can be shorter or longer. No particular recession is inevitable, but the occurence of some recession at some time in the next ten or twenty years does seem inevitable.

Gross Domestic Product

Profits across the Economic Cycle

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.

Consumer Spending

Consumer services is the most stable part of the economy. Consumer spending on durable goods, especially big-ticket discretionary purchases, is a highly cyclical sector.

GDP vs Consumer Spending

GDP vs Consumer Services

GDP vs Consumer Durables

GDP vs Consumer Non-Durables

Housing

Housing construction is of the most volatile sectors of the economy. Housing construction tends to lead the rest of the economy, in both expansions and contractions

GDP vs Nonresidential Construction

Capital Spending

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.

Government Spending

Federal government spending is usually not correlated with economic cycles. How ever state and local government spending is strongly affected by the economy, wuth larger effects in states depending on income taxes. Spending changes are lagges relative to the overall economic cycle.

Exports

Exports display large swings, but they are not strongly correlated with the American economic cycle.

Imports

Demand for imports varies with the underlying domestic demand dor that type of good or service.

Economic terms

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:

Gross Domestic Product (GDP)

A country’s total value of all it’s products produced and services delivered in a year.

Real versus nominal GDP

The nominal GDP is the gross domestic product of a country over a specific time period typically in quarters as in every 3 months starting January 1st. Meanwhile the Real GDP is the nominal GDP adjusted for inflation, so in other words it accounts for the loss of the value of the dollar over each quarter or month.

Gross National Product (GNP)

Gross National Product is simply the GDP but also including the net income from foreign investments.

Recession

A recession is when the GDP of a country drops or declines for 2 quarters consecutively in a row.

Leading Indicators

Leading Indicators help provide the beginning signs of turning points in our economy and business cycles based on a set of statistical analysis of economic activities that help in forecasting the early stages of future movements or changes in the economy. # Economic events

2007 Great recession

Describe the event in your own words here. The 2007 Great Recession was when the housing market crashed due low interest rates, very accessible credit, lack of governmental regulation of the financial industry and too many firms taking on too much risk. Well it had huge impacts, it lead to tones of foreclosures and people losing their homes. The stock market dropped substantially taking years to come back. People lost their jobs the unemployment rate at the time doubled. Several major companies went bankrupt one for example was General Motors. It was chaos.