U.S. GDP is expected to increase during the next 5 years. Unemployment seems to be taking a downturn as well. However inflation is expected to be higher than normal during this period as well with unemployment. As a financial analyst, how would you evaluate this forecast for your firm?© BrainMass Inc. brainmass.com October 24, 2018, 7:35 pm ad1c9bdddf
Its an issue of use of economic indicator to evaluate the future scenario for the economy, industry and firm.
Economic Indicators are used to gauge the impact of the indicators on the economy. An indicator is anything that can be used to predict future financial or economic trends. Popular indicators include unemployment rates, housing starts, inflationary indexes, S&P 500 and consumer confidence.
Unemployment as an indicator
There are lagging indicators also . A lagging indicator is one that follows an event.Unemployment is one of the most popular lagging indicators. If the unemployment rate is rising, it indicates that the economy is doing poorly or that companies are anticipating a downturn in the economy. Therefore the unemployment rate is a measure of past performance. It doesn't indicate much about the future performance. Similarly the lay off and hiring decisions comes with the lag and is based on the past ...
This discusses the concepts related to Unemployment
Unemployment, inflation, budget deficit
Four questions: There is one on unemployment, a couple on inflation and then one on budget deficit. If you could just walk me through step by step and break it down it would be GREAT! Thanks!
4. In Northlandia, there are no labor contracts; that is, wage rates can be renegotiated at any time. But in Southlandia, wage rates are set at the beginning of each odd year and last for two years. Why would equal-sized falls in aggregate output due to a fall in aggregate demand have different effects on the magnitude and duration of unemployment in these two economies?
10. Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan that
has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate. In
contrast, in a country such as Argentina, one that has recently had very high inflation, a change in the actual inflation rate will immediately be reflected in a corresponding change in the
expected inflation rate. What does this imply about the short run and long-run Phillips curves in these two types of countries? What does this imply about the effectiveness of monetary and fiscal policy to reduce the unemployment rate?
5. Concerned about the crowding-out effects of government borrowing on private investment spending, a candidate for president argues that the United States should just print
money to cover the government's budget deficit. What are the advantages and disadvantages of such a plan?
6. Boris Borrower and Lynn Lender agree that Lynn will lend Boris $10,000 and that Boris will repay the $10,000 with interest in one year. They agree to a nominal interest rate of 8%,
reflecting a real interest rate of 3% on the loan and a commonly shared expected inflation rate of 5% over the next year.
a. If the inflation rate is actually 4% over the next year, how does that lower-than-expected inflation rate affect Boris and Lynn? Who is better off?
b. If the actual inflation rate is 7% over the next year, how does that affect Boris and Lynn? Who is better off?