Econ305 study guide 2

Econ305 study guide 2 - Short-run economic fluctuations...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Short-run economic fluctuations - Real GDP grows 3.5% per year o GDP = broadest gauge of overall economic conditions, so natural place ot start in analyzing business cycle o Recession = period of at least 2 recessions Consumption falls, but decline is investment is even more volatile What is Okun’s law? Negative relationship between unemployment and GDP Percentage Change in Real GDP = 3.5% - 2 x Change in Unemployment Rate Short-run movements are highly correlated with utilizations of economy’s labor force Why are government economists interested in forecasting short-run fluctuations? 1. Affects the government (how much tax revenue government collects) 2. Can affect economy through its choice of monetary and fiscal policy Look at leading indicators – 10 data series (6-9 months in future) 1. Longer average workweek, increased GDP 2. Increase in weekly claims for unemployment insurance 3. New orders for consumer goods, increases GDP 4. New orders for investment goods (nondefense capital), increases GDP 5. Slow deliveries, mean more deliveries, increases GDP 6. More building permits issues, increases GDP 7. Increase in stock prices, expect economy to grow, increase GDP 8. More M2 money, more spending, increase GDP 9. Large interest rate spread (b/w 10-year T notes and 3-month T bills), means interest rates expected to rise, GDP increases
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 4

Econ305 study guide 2 - Short-run economic fluctuations...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online