A business manager, to assess the risk of a regional recession, needs to monitor the national economic cycle, the national cycle of the most important industries in the state, and the regional economic cycle of the state. ## Summary
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.
The overall national economy usually has a greater effect on a region than any other factor. The composition of a region’s output, in conjunction with the composition of the national economic growth, is the next greatest factor on a region’s economic performance.
Changes in a region’s population growth rate can cause the state’s economy to accelerate or decelerate.
As an investor in real estate I personally look for markets which are growing and will have sustained growth long term. When viewing this I look for jobs and industries moving into the area and also quality of life as some will take cheaper pay for a better quality of life such as an Arizona.
In the short run local economic policy has little to no effect in a local recession.
Although economic policy can’t help a region deal with a business cycle, policy is important to long-term growth. Good tax policy such no or marginal income tax have substantial evidence that people are moving into them and has faster economic growth than states with higher income tax rates.
Regional producers benefit from weak local conditions as labor and availability suffers when workers have many job opportunities in a strong economy.
| 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.
It’s a statistic which measures a state’s industrial specialization corresponding to a larger geographical unit.
Leakages are when money is put into the economy by the government to help build a stronger economy but a leakage is when for instance The Ohio government is trying to build up it’s local economy by building a bridge but the steel needed to build the bridge is actually coming from New York. In that case the steel coming from New York would be a leakage.
Marginal cost is the costs in production to produce one more additional unit.
Describe the characteristics of the following events briefly.
So in Idaho in the 1970’s they had population growth of 3% per year then in the 80’s it started to decline causing causing construction to fall from 19,000 to 13,000. As construction fell by 1/3 it caused total employment to fall 2% in the state.
Hawaii’s employment declined for 4 years straight even though the national economy was growing. The problem was that even though everything was great in the United States Japan suffered a recession which reduced the number of tourists in Hawaii.