economic forecasts

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What is the purpose of economic indicators?
Economic indicators are statistical data showing general trends in the economy. Those with predictive value are leading indicators; those occurring at the same time as the related economic activity are coincident indicators; and those that only become apparent after the activity are lagging indicators.

What are considered leading economic indicators?
Leading economic indicators are those that change before the economy has changed. Examples of leading indicators include production workweek, building permits, unemployment insurance claims, money supply, inventory changes, GDP, Consumer Price Index (CPI) and stock prices. The Fed watches many of these indicators as it decides what to do about interest rates. There are also coincident indicators, which change about the same time as the overall economy, and lagging indicators, which change after the overall economy, but these are of minimal use as predictive tools.

What is the purpose of developing economic forecasts?
Forecasts estimate future trends by examining and analyzing available information. Economic forecasts are developed to predict the nature and pace of economic events, usually for a period of about one year into the future. Here is a link on economic forecasts:
http://bwnt.businessweek.com/Glossary/definition.asp?DEFCode=E05

What factors affect economic forecasts?
Sunspots are events which can affect economic variables (like inflation) only because the public believes they can -- like how the rumor of bank runs actually caused runs on banks during the Great Depression. Also we need to know the accuracy of the forecasts and if any biases were included in the calculations of these forecasts.

Should economic forecasts be dynamic or static? Explain.
A static forecast would be the Input Output model which simulates the flow of goods and services between the different sectors in an economy based on certain internal and external parameters. Similarly, the I-O model has ...