Economic Indicators Leading Indicators An economic indicator that changes before the economy has changed. Examples of leading indicators include production.

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Presentation transcript:

Economic Indicators Leading Indicators An economic indicator that changes before the economy has changed. Examples of leading indicators include production workweek, building permits, unemployment insurance claims, money supply, inventory changes, and stock prices. The Fed watches many of these indicators as it decides what to do about interest rates.

Leading Indicators

Economic Indicators Lagging Indicator A sign of a change in the business cycle that can only be measured after the change has taken place. GDP and CPI are two examples of lagging indicators.

Lagging Indicators What Do You Think Just Happened?

Economic Indicators Coincident Indicators occur at approximately the same time as the conditions they signify. Non-farm payrolls is a popular coincident indicator. -Examples for a coincident indicator include industrial production and personal income. Sales figures from manufacturing and trade are another source for coincident indicator assessment.

Coincident Indicators What Do You Think is Happening?

Consumer Price Index CPI A statistical measure of the avg of prices of a specified set of goods/ services purchased by a typical consumers in city areas. CPI gives us the prices so intern we can determine the rate of inflation. The year 1982 is used as the base year

Current CPI Data Notice the figures are all + and – That’s based on the rate of change from the base year 1982.

KEY- Economic Indicators GDP- The monetary value of all the finished goods and services produced within a country's borders in a given year. C+I+G(X-M)

Economic Indicators NDP (Net Domestic Product) GDP minus the loss of value of capital goods due to depreciation. Depreciation- the loss of value because of wear and tear to durable goods and capital goods.

Economic Indicators (X-M) Net Exports is the difference between how much the nation sells to other countries (export), and how much we buy from other countries (imports) National Income- the total sum of all incomes in a nation.

Per Capita GDP The GDP divided by the population= the sum of all goods and services produced on average person.

CPI & PPI’s CPI- a statistical measure of the avg price of goods purchased by typical consumers in city areas. Market Basket- representative group of goods/ services used to compile the consumer price index Base Year PPI- measure of the change in price over time that U.S. producers charge for their goods/ services.

Economic Indicators Now GDP that we discussed before is truly called nominal GDP because it is not adjusted for inflation. When we adjust GDP to account for inflation we get Real GDP Page 344 in your book

Khan Inflation Video

What about inflation? Inflation- The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. 1) Decreases the value of a dollar 2) Discourages business investment Annual Rate of inflation is 3.24%

What about inflation? Hyper- Inflation An extremely rapid increase in price, or devaluation of the dollar Deflation- The rate at which the general level of prices for goods and services is DECREASING, and, subsequently. 1) Very rare 2) Hyper can also occur