A business manager, to assess the risk of a regional recession, needs to monitor
Although a regional economic cycle is not perfectly synchronized with its national counterpart, it tends to move up and down with the national economy. In addition to the broader national economy, two other factors influence a regional economy: the national cycle of its most important industries and its internal growth cycle associated with construction swings.
There are two different perspectives to consider in analyzing a regional economy: when a company sells into a distinct local market and when a company primarily produces in a local market and sells into a national or global market.
Comparing a regional industry to the national economy can help a business understand how well that area does related to the economy. States that replicate the national economy will have economic cycles that reflect the economy. States that are lower in relationship to the national economy show cycles that are not similar to the national pattern. Understanding how to use a location quotient will help managers navigate through a state to see what industry shows significance.
Population growth rate plays a significant role in internal regional cycles. When population increases, services such as construction, heating, and landscaping also increase. With this, the economy starts to gradually increase in that region.
States that have rapid population growth tend to have a secure growth pattern and this increases revenue coming into that state. Also states with similar patterns to the national economy show positive impacts in their region in relationship with the importance of their industries. Also when people want to work they will pick a region they enjoy and work there. Also having a positive life in a nice region attracts people to certain areas.
Economic policy can have an impact to regional cycles but does not show a significant impact on the national cycle. Highways have little impact along with tax cuts in a given region.
Growth within a business happens with less regulations on how they operate services and hire employees. Having a well-developed tax system in the region can make start-up costs bearable without having the burden of the state taxing everything.
Companies are fighting each other for their profit from region to region. If an industry is the only one in a region, it can thrive and change their prices if a recession occurs. When the local economy thrives, producers can undergo some costs such as labor and the price of products.
Being aware of the local economy statistics in an industry is important to be successful in a certain area. Reviewing the unemployment rate can help navigate how high the need for employees is, but it does not have a tremendous impact on the economy. How much a state makes is important so a manager can navigate where the best place to have a business would be.
| indicators | |
|---|---|
| national economy | |
| national cycles of the industry | national automobile sales for car dealers |
| local economy |
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| population and migration | housing permits, drivers licenses |
| consumer spending | state sales tax: drill down to exclude construction materials |
Dealing with a regional downturn
| the local economy is similar to the national economy | the local economy is different from the national economy | |
|---|---|---|
| a company selling into the local market | Follow the pattern described in chapter 7 with no additional local considerations. |
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| a company only producing in the local market | Follow the pattern described in chapter 7 with no additional local considerations. |
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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 terms in your own words briefly.
Evaluates an industry in a region and finds out how significant that industry is relative to the national economy.
A decrease in profit from the economy results in a decrease in the total income in the world.
When a product has been produced more than expected, the price can fluctuate negatively or positively.
Describe the characteristics of the following events briefly.
With a drastic increase in the growth rate in Idaho, homes were needed and consumers were spending money. When a decrease in the growth rate hit Idaho, the unemployment rates dropped, specifically in construction since the need for homes was not as high as it previously was before 1986.
The state showed a positive outlook in the economy, but was suffering from low employment rates. This issue happened due to the recession in Japan which lead to a declined in tourist consumption of goods.