Economic Indicators Project
Question #1: Economic Indicators:
a. What is an economic indicator?
An economic indicator is a statistic about an economic activity. Economic indicators allow analysis of economic performance and predictions of future performance. One application of economic indicators is the study of business cycles. Economic indicators include various indices, earnings reports, and economic summaries.
b. Briefly define of each of the following, and say why each may be considered an economic indicator:
i. Real GDP：
The production of goods and services valued at constant prices.
Why: Because GDP includes the market value of the housing services provided by the economy’s stock of housing. It is an important data for economic indicator, compared with nominal GDP; real GDP depends on constant prices.
ii. Consumer Price Index
A measure of the overall cost of the goods and services bought by a typical consumer.
Why: it is an important data to know the situation for consumer. iii. Consumer Confidence Index
A survey by the Conference Board that measures how optimistic or pessimistic consumers are with respect to the economy in the near future.
Why: CCI will influence how people consume in recent time and how they consume in near future.
iv. Unemployment Rate
The percentage of the labor force that is unemployed.
Why: A important data to know how many people are unemployed, it also can analyze the income and consume.
v. Housing Starts
Housing starts is an economic indicator that reflects the number of privately owned new houses (technically housing units) on which construction has been started in a given period. This data is divided into three types: single-family houses, townhouses or small condos, and apartment buildings with five or more units.
Why: it can influence the number of new houses, important part of investment. vi. Retail Sales
Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers are part of an integrated system called the supply chain.
Why: according to the data of retail, people can know the situation of consume for whole economy. vii. S&P 500
The S&P 500 is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.
Why: People can look the data of S&P 500 to choose stocks, influence saving and investment.
viii. Manufacturing Inventories
Manufacturing Inventories refers to the goods and materials that a business holds for the ultimate purpose of resale (or repair).
Why: the sales status of manufacturing can be analyzed by inventories, people also can know the financial situation.
ix. The Prime Rate
The Prime Rate is a term applied in many countries to reference an interest rate used by banks.
Why: People need to think about the prime rate then decide to save money on bank or not, also an important data of percent value and future value.
Question #2: GDP
a. Obtain data for the following variables for the United States in 2012.
i. Gross Domestic Product (Y) ii. Consumption (C) iii. Investment (I) iv. Government Spending (G)
v. Exports (EX) vi. Imports (IM)
According to the table by National Income or Expenditure:
i. Y=15681.5 (Billions of dollars) ii. C=11,120.9 (Billions of dollars) iii. I=2058.6 (Billions of dollars) iv. G=3062.9 (Billions of dollars)
v. EX=2182.6 (Billions of dollars) vi. IM=2743.3 (Billions of dollars)
b. Confirm and illustrate that Y = C + I + G + (EX – IM)
Take the data outlined above as an example:
Y = C + I + G + (EX – IM)
According to calculator, 11120.9+2058.6+3062.9-560.8=15681.7, because all numbers is billions of dollars, so there is a little error.
c. What share of GDP is composed of consumption? What share of GDP is composed of investment? What share of GDP is composed of government