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In: Economics

List and describe four economic indicators that we discussed in class that are important when evaluating...

List and describe four economic indicators that we discussed in class that are important when evaluating a market for expansion. Explain what each tells you about a market and why it’s important. (This is a short answer prompt)

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Expert Solution

Employment- Employment is possibly the most significant measure of the economy's wellbeing. Each month on the first Friday the U.S. Bureau of Labor Statistics issues two studies that have been closely monitored. These are tracked month by month, so it's important to know if the numbers go up, down, or sideways. The unemployment rate monitors the number of employees left out of jobs at present. The nonfarm payrolls report tracks the number of jobs added or eliminated in the overall economy.

Inflation- The Federal Reserve's mission is to promote economic development and global price stability. Price stability is measured as the rate of inflation change, thus market participants are eagerly monitoring monthly inflation reports to determine the future course of monetary policy of the Federal Reserve There are many inflation indexes but maybe the Consumer Price Index (CPI) is the most closely watched. The CPI measures the change in ordinary commodity prices that most people spend on, such as clothing and medical services.

Consumer Activity- Consumers account for about 70 per cent of all economic activity in the United States. Therefore it is important to monitor their spending habits and even their level of optimism about their economic well-being. Consumer confidence drops when people are insecure about their jobs. Fewer people go shopping high. Declining corporate earnings
One such "leading" indicator is the Consumer Confidence Index. The degree of trust that consumers have in their own economic welfare makes them eager or reluctant to consider purchasing a new vehicle or going on holiday.

Investor Activity- This is not when everyone is optimistic that the safest time to invest in stocks is when nearly everyone is bearish. Buy when inventories are cheap. Keep on before they're finished. So investor sentiment readings are significant. A variety of indicators are published by large investment firms and research firms, which periodically poll their clients to determine market consensus. As foreign investors have become increasingly significant players in U.S. capital markets, more attention has been paid to indicators of their operation. One of the most closely monitored studies concentrates on U.S. buying. Global central bank treasuries.


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