BTM101 HW 7 8 Essay - 1271 Words

Prof. B. Smith BTM101-0051

HW 7-8. Due on 9/18/2013

1) P.52: a) Name the three economic indicators and describe how well the United States is doing based on each indicator: Three major indicators of economic conditions are (1) the gross domestic product (GDP), (2) the unemployment rate, and (3) price indexes. (1) Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the second quarter of 2013 (that is, from the first quarter to the second quarter),according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.1 percent. For the US GDP is reported in trillions of dollars; GDP is expected to exceed $16.3 trillion for 2013 up from $14.9 in 2011, and $15.6 in 2012. (2) In the United States, the unemployment rate measures the number of people actively looking for a job as a percentage of the labor force. The Unemployment Rate in the United States decreased to 7.30 percent in August of 2013 from 7.40 percent in July of 2013. Unemployment Rate in the United States is reported by the Bureau of Labor Statistics. Both the number of unemployed persons, at 11.3 million, and the unemployment rate, at 7.3 percent, changed little in August. The jobless rate is down from 8.1 percent a year ago. (3) (a) In the United States, the Consumer Price Index or CPI measures changes in the prices paid by consumers for a basket of about 400 goods and services. The Consumer Price Index (CPI) in the United States increased to 233.32 Index Points in July of 2013 from 232.94 Index Points in June of 2013, and up from July, 2012 of 228.62. Consumer Price Index (CPI) in the United States is reported by the U.S. Bureau of Labor Statistics (BLS). (b) In the United States, the Producer Price Index measures the average change in price of goods and services sold by manufacturers and producers in the wholesale market during a given period. Producer Prices in the United States remained unchanged at 197.30 Index Points in July of 2013 from 197.30 Index Points in June of 2013. Producer Prices in the United States is reported by the U.S. Bureau of Labor Statistics (BLS). The United States Producer Prices reached its all time high of 197.80 Index Points in September of 2012 As to how well the United States is doing, the United States economy is still in recovery (this occurs when the economy stabilizes and starts to grow), however, the economy, GDP is growing slowly in large part because of the government sequestration. Unemployment has dropped a bit due mostly to private sector hiring and people leaving the workforce. Inflation remains very low, as are interest rates - a Federal Reserve policy (Monetary Policy – the management of the money supply and interest rates). The stock market is performing relatively well, although, at times it is very unpredictable in response to global conflicts and domestic economic policies. In one trading day the market could lose significant value and regain it soon thereafter, or it may take years, as we witnessed more recently since the Lehman Brothers debacle in 2008. Retailers have been adding jobs because they expect consumers to increase spending this year, even though the payroll tax reduction expired. New housing starts and home purchases have also been showing signs of improving. Overall, there may be some guarded optimism but the economic condition is still tentative, it could go either way, up or down depending, at present largely, on the federal government's debt ceiling disagreement. b) What’s the difference between a recession and a depression? Business cycles are the periodic rises and falls that occur in economies over time. In a recession – which occurs when two or more consecutive quarters show declines in the GDP; prices

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