Eonomic Signals and Cost-Benefit Analysis in Macroeconomics - Essay Example

These economic indicators and signals are beneficial for different business analysts and experts. The business analysts can use these economic signals in order to take important business decisions and in turn can come up with effective and timely short term and long term strategies. Along with this, these economic indicators and figures facilitate business analysts to decide whether it is feasible to invest in a new venture, launch a new product, or enter into new markets (The Economist, 2) DIRECT AND INDIRECT SIGNALS: These economic signals can be either direct or indirect signals.

Direct signals are the one which are directly interpreted from the economic data and reflects the future situation of the subject under consideration. On the other hand the indirect signals are one which have indirect impact on the economy and situation. For example, economic report about the decrease in the consumer spending directly signals the decrease in the level of GDP, which in turn indicates the possibility of recession. At the same time the decrease in the consumer spending indirectly signals the decrease in the investment activity, as the investors will expect that in future there will be a short term decrease in the interest rate by the central bank in order to stop the possible recession.

DIRECT AND INDIRECT MACROECONOMIC SIGNALS CONTAINED IN A THREE MONTH OF RETAIL SALES DATA: Retail sales is one of the most important economic indicator which is followed by the investors and the economic analysts in order to predict the future condition of the market and economy. Retail sales depicts the household expenditure on the different physical products by the consumers. The retail sales data of three month will directly determine the future state of inflation in the economy. For instance, if there is an increase in the retail sales then it directly indicates that there is an increase in the consumer spending which will lead to the increase in demand.

This increase in demand will result in increasing the prices and ultimately will increase the inflation in the economy. At the same time, the increasing demand and prices will put pressure on the supply of the physical goods and there will be more investment activity, which will signal high value of GDP and improved condition of the economy. On the other hand if there is a decrease in the retail sales, it can be interpreted that there is a decrease in the consumer spending. This in turn will result in decrease in demand and prices of the physical goods.

The decreasing demand and prices will also force the supply of the physical goods to decrease which in turn will influence the overall state of the economy and will signal a recession in the economy, as there will be less investment activities on part of the investors. COST – BENEFIT ANALYSIS IN MACROECONOMIC OFFERED BY HENRY HAZLITT: It is important to first analyze the costs and benefits of any decision and policy in order to make sure that the required aims and objectives can be achieved effectively and efficiently.

In economics, costs are the most important component of any analysis and decision. The decisions taken by the economists and analysts are directly dependent on the balance between the requirements and the limited resources. This in turn makes it important to analyze and understand the opportunity cost of any particular decision. Cost