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Unformatted text preview: ⇒ boost savings i.r ⇑ ⇒ lower business investment ⇒ Lower GDP MS⇓ ⇒ inflation⇓ ⇒ Output⇓ (higher
wages) ⇒ GDP⇓ ⇒ Unemployment In other words: Unemployment is driven by differences between
short term expected inflation and actual inflation. In the long run unemployment cannot remain
below the natural rate ( 4%) due to price pressure
on wages. Natural unemployment = structural
unemployment and frictional unemployment MS policy controls cyclical unemployment. Strong Currency Little inflation Weak Currency High inflation Industry Analysis
Industry Analysis Industry analysis helps investors isolate investment opportunities that have favorable riskreturn characteristics.
Auto analyst, drug analyst, retail analyst etc. Investors look for:
Investors look for: Differences in industry risk
Industry performance over time
How economic trends impact different industries?
How do industries differ in riskreturn patterns?
Do all firms in an industry perform in a similar manner? Is the industry profitable? What is the firm’s position in the industry? Business cycle and Industry Business cycle and Industry Performance Economic trend are expressed in the form of cyclical changes and structural changes. What determines Industry What determines Industry profitability
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- Fall '14