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

By analyzing the economic data and associated signals, business analysts are able to forecast and predict the future options and take decisions accordingly. Different business and economic analysts look and monitor different economic indicators according to their own requirements and needs. TYPES OF ECONOMIC SIGNALS USED BY ANALYSTS: These signals which are derived from the economic data can be categorized as direct signals or indirect signals. The direct signals are easy to interpret and relate with the economic condition.

Whereas, the indirect or casual signals are used by the economic and business analyst in order to predict the indirect impact of macroeconomic indicator on the economic condition in future. This difference of direct and indirect signals can be explained with the help of an example. The economic reports about the increased GDP and growth in different commodities results in directly influencing the value of the currency and the investors in turn can make profits from it. The indirect signals which can be derived from the predictions about the increased GDP and economic growth, as a result of which the traders of currency indulge in buying more currency in anticipation of future growth in the currency value and making profits.

MACROECONOMIC ANALYSIS OF RETAIL SALES DATA AND INTERPRETATION OF DIRECT AND INDIRECT SIGNALS: The data of retail sales is generally used by different economic analysts in order to predict the amount of the personal or consumer consumption on different physical goods. Personal consumption is one of the four major components of the Gross Domestic Product (GDP) and directly reflects the economic condition of any country. Sometimes, economic analysts also use the data of retail sales in place of the consumer consumption in the calculation of the Gross Domestic Product (GDP), if actual data about consumer consumption is not available (Rogers, 4).

In reference to the analysis of the business conditions, the increase in the retail sales clearly indicates the increase in the purchasing power of the consumers along with the increasing demand of the physical products. The retailers and manufacturers can take in turn predict that this increase in the retail sales will ultimately increase the price and in response to this the supply of the products increases in order to reap more benefits. All these factors will contribute in the process of economic growth and development.

On the other hand if the retail sales decrease this signals the decrease in the purchasing power of consumers, along with decrease in the demand of the products. Which in turn will put downward pressure on the prices and will reduce the supply of these products. This as a whole will slow down the process of economic growth. Along with this the data about the retail sales can guide the business analysts about the changing demands and needs of the consumers. QUESTION # 2: HENRY HAZLITT CONCEPT OF COST BENEFIT ANALYSIS IN MACROECNOMICS: Henry Hazlitt has proposed a whole new idea of economic policies and decisions.

He, after second world war, presented in this book ‘Economics in One Lesson’ that the main concept behind all studies and theories of economies is that the analyst and policy makers should keep in mind the long term and larger impacts of any economy policy and not only the short term implications (Rockwell, 7).