Question

please describe them in depth.

1. Business sentiment: Purchasing managers are the consumers of the business world, which is why it makes sense to ask them how businesses feel about the economy. The Institute of Supply Management does just that with its Manufacturing Report On Business®.
2. Inflation:When the Federal Reserve (the Fed) is on the lookout for inflation, it puts investors on pins and needles. If the Fed thinks inflation is rising, it will put on the economic brakes by raising interest rates. Although knowledgeable investors and economists at the Fed use the PCE price deflator(PCEÂ stands for personal consumption expenditures; the deflator is also called and implicit price deflator) to track inflation, the most popular inflation indicator is the Consumer Price Index (CPI).

Answer 1

Inflation happens when money supply increases in the economy causing the prices to go up due to high demand.

One method to control Inflation is by a contractionary monetary policy which helps to reduce money supply in the economy. It is done by increasing interest rates by the Federal Reserve( the rate at which banks borrow money). When Fed interest rates are increased, the banks will also have to increase their rates to compensate their loss. This makes it costly for the people to borrow money frm the banks. Hence, spending goes down leading to decrease in prices.

There are 2 ways to measure inflation- Personal consumption expenditures (PCE) & Consumer Price Index (CPI). The PCE includes a broad range of consumer expenditures. It can record even small changes in inflation as adjustments due to short term changes in consumer choices can be made in PCE. whereas the CPI includes a fixed basket of goods & services & some expenditures in the PCE are not covered in the CPI. The PCE uses business surveys which is more reliable than CPI which uses consumer surveys.