Factors for Economic Measurements
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|✓ Wordcount: 1951 words||✓ Published: 26th Oct 2020|
Gross Domestic Product is an economic measurement of the market rate of all final production of goods and services, often yearly, over a specific time period.
Right now the Gross Domestic Product is important to me as I am a consumer and In the future, the GDP would impact me by determining the availability of jobs. If the GDP is up, there is usually low unemployment which means that whatever profession I choose to go into will have an influx of job opportunities. If the GDP is speeding up too fast, loans for cars and homes would be more expensive hindering my ability to apply for a loan. If the GDP is down my job security may be at stake because of fears of a recession, which means there will be layoffs and mass unemployment.
The Consumer Price Index is an indicator of shifts in prices for retail products and other products purchased by traditional buyers.
As a teenager, I would use the Consumer Price Index to see what would be a good purchase. The Consumer Price Indexmight impact me later in life by determining how big my paycheck would be. My employers may use the CPI, officially or informally, to decide how much to offer me and other employees of a cost-of-living increase. If I decide to rent an apartment, CPI can also impact the cost of the rent. Many landlords tie rent changes to CPI increases; in some cities, rent increases for some properties cannot exceed the increase in the CPI.
Housing Starts is the number of fresh housing building projects initiated in any given month. Housing Starts is formally known as the New Residential Construction Report.
Currently, Housing Starts affect my parents by determining how easy or hard it is to buy or sell a house. Housing Starts will be important to me in the future as a rise in housing starts mean that there are more houses available on the market and that these houses are selling for a reasonable price.
The Consumer Confidence Index is an indicator that estimates in the near future how confident or negative buyers are about the economy.
Currently, the Consumer Confidence Index shows me how confident other people are with the economy and makes me think about my purchases. Later in life, the CCI will impact me by measuring how confident I am with the economy and my own financial situation. During economic expansion, consumer confidence is high as consumers like me would thus tend to spend more than they do at other times, especially for bigger-ticket items and durable goods. If for some reason consumer confidence is low, it is because consumers like me aren’t as secure with financial situations and do not spend as much money.
Merchandise Trade Balance is the correlation between the country's import value and the country's export value over a given period.
The Merchandise Trade Balance (Balance of Trade) currently impacts me by differentiating the number of imports and exports available to buy. Later in life, the BoT will come to impact me by deciding if there is a trade deficit or trade surplus. If the country has a trade deficit this means that we are in an economic downtime because the country borrows money to pay for its goods and services. This indicates that the power of the dollar decreases in value and this results in consumers like me being able to buy fewer products. If there is a trade surplus, the economy is thriving and the power of the dollar increases and consumers will be able to buy more.
The Producer Price Index is a group of indicators that, over time, calculates and reflects the average motion in national selling rates. From the perspective of the seller, the PPI measures price movements.
As of now, the Producer Price Index impacts me as it indicates the price of certain products and the change in prices in goods and services. This makes me think twice before buying an item and potentially making an impractical purchase. In the future, the PPI will impact me if I work in a goods-producing company as I will have to use the PPI to adjust the prices of the goods produced.
Retail sales assess long-term purchases of durable and unsustainable goods about once a month. This figure screens and tracks the expenditure habits of consumers and the demand for finished goods.
Presently, I would use Retail Sales to see what goods and services are popular and what goods are declining and what would make a practical purchase. As an adult, I would use retail sales to see what companies to invest in. Retail sales could also impact me by showing me which items are on a rising trend and which items are declining in use. Based on retail sales I would also see if there is a certain product of a brand that is more popular than the same products of different brands.
The Purchasing Managers ' Index is an index in the industrial and service industries that indicate the direction of economic trends in these industries
I am influenced by the Purchasing Managers’ Index in the current day as it indicates the number of a certain product that is available for me to buy. This is because manufacturers look at the number of future orders they expect and make decisions based on those numbers. The PMI could make an impression on me as an adult if I ever go into the industrial and services industries as I will have to use the PMI to make decisions on products my company produces. The PMI also will come into play when I have a steady job and enough money to buy more goods and services to affect these numbers.
The Unemployment Rate is the proportion of the unemployed labor force, expressed as a percentage. It is a lagging indicator, which means it usually increases or falls in the aftermath of altering financial circumstances instead of anticipating them.
In the present time, the Unemployment Rate affects my parents by indicating what the household income would be. Unemployment Ratewill influence me when I am older as it will determine the number of jobs that are available. Not only will it influence the number of jobs but it will also indicate the amount of work that I will have to do depending on the rate. If the rate is high then I will have to do more work since there are not as many people working at my company and if the rate is low, then the amount of work is less since there are more people working at the company.
Durable goods orders represent fresh orders placed in the near term or future with national producers for the supply of factory goods. Durable goods orders are released every month with two parts: the advance report on durable goods and manufacturers production.
Importance of Macroeconomics
Macroeconomics (from the Greek prefix macro- meaning "large" and economics) is a branch of economics that deals with an economy as a whole's performance, structure, behavior, and decision-making rather than consumer markets. Studying macroeconomics is important because it helps us understand the general state of the economy, helps us understand the drivers of income, savings, investments, and employment in an economy, and helps us understand international trade.
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We study the entire economic system in macroeconomics, such as national income, total savings, and investment, total employment, total demand, total supply, overall price level. We study how and what causes changes in these totals and averages of the economy as a whole. This is important as it helps us interpret the more specified topics of macroeconomics better so that we can be aware of the small things that influence the state of the economy. Knowing certain things such as the Gross Domestic Product or the Unemployment Rate really boosts the understanding of the state of the economy. Furthermore, studying macroeconomics is important as it helps people gain more knowledge of the general state of the economy as macroeconomics deals with the economy as a whole.
To understand the general state of the economy would mean that a person would also have to learn about the drivers of the economy. Studying macroeconomics is important in understanding the factors that influence the economy. Some of these factors and drivers include the GDP, Unemployment Rate, and income. Essentially learning about the drivers of the economy and its different factors help the average citizen understand the state of the economy.
One thing that is important about studying macroeconomics is how it assists us in the education of international trade which is an important factor in the economy. First off there are many factors that affect international trade and knowing these factors helps people recognize what the state of the economy is. Some of these factors include interest rates, the GDP, and the balance of trade which dictate the import and export values of a country. Based on these values, people who have studied macroeconomics will use money differently in the different situations that arise. For example, in a trade deficit, people will be less willing to spend money as the value of money decreases and the price of goods increases. On the other hand, during a trade surplus, consumers would be willing to spend money as they know that the economy is doing well.
All in all, learning the drivers of the economy such as international trade helps the average consumer understand the given state of the economy. One part of macroeconomics is the economy and its behavior. This is important because the economy dictates the daily lives of people as it indicates the income, unemployment rate, and other monetary values. The opposite is also important because understanding the state of the economy means that a person is aware of the economic indicators.
- Chappelow, Jim. “Purchasing Managers' Index (PMI) Definition.” Investopedia, Investopedia, 12 June 2019, www.investopedia.com/terms/p/pmi.asp.
- Chen, James. “Consumer Price Index – CPI Definition.” Investopedia, Investopedia, 27 July 2019, www.investopedia.com/terms/c/consumerpriceindex.asp.
- “Gross Domestic Product.” U.S. Bureau of Economic Analysis (BEA), www.bea.gov/data/gdp/gross-domestic-product.
- Halton, Clay. “Durable Goods Orders Definition.” Investopedia, Investopedia, 22 July 2019, www.investopedia.com/terms/d/durable-goods-orders.asp.
- Kagan, Julia. “Unemployment Rate.” Investopedia, Investopedia, 24 May 2019, www.investopedia.com/terms/u/unemploymentrate.asp.
- Kenton, Will. “Balance of Trade (BOT).” Investopedia, Investopedia, 17 May 2019, www.investopedia.com/terms/b/bot.asp.
- Kenton, Will. “Consumer Confidence Index (CCI).” Investopedia, Investopedia, 4 Apr. 2019, www.investopedia.com/terms/c/cci.asp.
- Kenton, Will. “Housing Starts.” Investopedia, Investopedia, 11 July 2019, www.investopedia.com/terms/h/housingstarts.asp.
- Kenton, Will. “Reading Into Retail Sales.” Investopedia, Investopedia, 27 May 2019, www.investopedia.com/terms/r/retail-sales.asp.
- Majaski, Christina. “Understanding the Definition of Producer Price Index – PPI.” Investopedia, Investopedia, 21 Aug. 2019, www.investopedia.com/terms/p/ppi.asp.
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