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Economic Indicators - Essay Example

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In the paper “Economic Indicators” the author analyzes Economic Indicators, which illustrate how sound the economy is working at present and how well it is going to perform in the future. These indicators influence the investor’s predictions about the future of the economy…
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Economic Indicators
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Download file to see previous pages The major pro cyclic economic indicators are GDP, Interest rates, Investment, Inflation, Labor etc. While the main counter cyclic economic indicators are Unemployment, International Trade, and Federal Finances etc. The Gross Domestic Product is one of the most significant direct indicators in the economy. It is vital to monitor the growth rate of the GDP. Any deviation from the range tends to have a significant impact on the economy. An increase in the growth rate above the general level may lead to high inflation and poor performance in the rate of growth leads to a recession. Interest Rate is a pro cyclic or direct economic indicator. They are used to manage the booms and slumps in the business cycle and finely tune it. The interest rates fall in recessions and they rise in inflationary periods. International trade is the swapping of goods and services between countries, which tends to have countercyclical nature. When an economy is prospering and experiencing an economic boom then people choose to spend a bigger part of their income on imported and local goods and services, however, exports don’t have such alterations. This in turn upsets the balance of trade, as net exports are negative, which results in more being imported and less being exported. Whereas, when an economy is in a slump, people tend to spend less on imported goods and services and just focus on the basic necessities. This encourages more goods and services to be exported and has a favorable impact on the balance of trade as less is being imported. ...Download file to see next pagesRead More
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