Economic Indicators:Definition/Performance

Solution Preview

Here you go- hope this helps. Good luck!

Ten Economic Indicators
1. Real Gross Domestic Product (GDP)
This is the market value of all goods and services produced in a nation during a specific time period. It is a measurement of wealth in the society. It is "real" because it is adjusted to account for changes in year-to-year prices. It is a gauge of the health of the nation's economy.

In the U.S. the Federal Reserve uses the GDP, in part, to set monetary policy.

The U.S. GDP is $15.09 Trillion US Dollars. This figure increased at an annual rate of 1.5 % in the second quarter of 2012 (Bureau of Economic Analysis, 2012).

2. Money Supply (M2)
The money supply is the aggregate total of all money a country has in circulation. This includes all physical currency (bills & coins), checking accounts, assets in money market accounts and money market mutual funds, savings, and cds. It does not include institutional money fund assets, time deposits (more than $100,000) or special reserves banks are required to maintain.

The Federal Reserve uses this information to assess economic and financial conditions, and to raise/lower interest rates. Its' purpose is to bolster or reduce the money supply. The Fed can increase the money supply by lowering interest rates (to help economy) or reduce money supply by raising interest rates if needed.

Here is a link to how the US has performed: http://www.federalreserve.gov/releases/h6/current/
The money supply has posted a 14.6 % year over year increase, for "the 39th consecutive month of double digit year over year rates of monetary inflation. The Money supply is up 50 % over those 39 months. (Pollaro, 2012). This shows a "boom" which, according to experts, will result in a "bust".

3. Consumer Price Index (CPI).
The consumer price index measures changes in the prices paid for goods and services by consumers for the specific month. It shows the individuals' cost of living changes to provide a gauge of the inflation rate related to purchasing of these goods and services. It is a sampling of products form 200 item categories. It does not include income, Social Security taxes, or investments. . It is the best indicator of inflation.

The CPI was unchanged in June and July of this year, the index for all items less food and energy rose 0.1% in July, according to the Bureau of Labor ...