SIE 11 Economic Indicators

Consumer Price Index (CPI)

- measures rate of increase/decrease in broad range of consumer prices: - food, housing, transportation, medical care, clothing, electricity, entertainment, services

Gross Domestic Product (GDP)

- nation's annual economic output (all goods and services produced WITHIN the nation) - personal consumption, gov't spending, gross private investment, foreign investment, net exports

hyperinflation

- pace of inflation is very high and accelerating - severely erodes purchasing power of currency - investors move cash away from nation and the currency experiencing it, worsening the devaluation of the currency

examples of lagging indicators

1. corporate profits 2. avg. duration of unemployment 3. labor cost/unit of output (manufacturing) 4. ratio of inventories to sales 5. commercial and industrial loans outstanding 6. ratio of consumer installment credit to personal income

examples of leading economic indicators

1. money supply (M2) 2. building permits (housing starts) 3. avg. weekly initial claims for state unemployment compensation 4. avg. work week in manufacturing 5. new orders for consumer goods 6. machine tool orders 7. changes in inventories of durable goods 8. changes in sensitive materials prices 9. stock prices 10. changes in business and consumer borrowing

The monthly unemployment figure is considered a A) coincident indicator. B) lagging indicator. C) leading indicator. D) dragging indicator.

A) coincident indicator. coincident indicators: change along with economy as a whole - number of hours worked - employment - nonagricultural employment - personal income - industrial production - manufacturing and trade sales - GDP

All of these are leading economic indicators except A) duration of unemployment. B) the stock market as measured by the S&P 500. C) building permits. D) manufacturer's new orders.

A) duration of unemployment. - this is a lagging indicator - leading indicators: - stock market - building permits - money supply (M2) - avg. weekly initial claims for state unemployment compensation - avg. work week in manufacturing - new orders for consumer goods - machine tool orders - changes in inventories of durable goods - changes in sensitive materials prices - changes in business and consumer borrowing

An economic event where consumers experience an extreme increase in the cost of goods in a short period is A) hyperinflation. B) stagnation. C) deflation. D) suprainflation.

A) hyperinflation.

The economic indicator that reflects activity of U.S. entities without regard to where the activity takes place is A) CPI. B) FUN. C) GNP. D) GDP.

C) GNP. - GNP: economic indicator reflecting activity of US entities WITHOUT regard to WHERE activity takes place - GDP: activity WITHIN the US, regardless if its a domestic entity or not - CPI: inflation measure

The most commonly referenced indicator of economic activity is A) Dow. B) CPI. C) GNP. D) GDP.

D) GDP. - the most commonly referenced economic indicator that measures overall economic activity = gross domestic product (GDP) - GNP isn't covered as frequently - CPI measures inflation, not activity

When consumer prices are increasing at a steady but reasonable rate this is considered a healthy level of A) wage increases. B) stagnation. C) inflation. D) growth.

C) inflation.

An economic indicator that tends to change direction following a change in the direction of GDP is a A) coincident indicator. B) flagging indicator. C) lagging indicator. D) leading indicator.

C) lagging indicator. - lagging: change direction AFTER change in overall economy

The nation is experiencing a rapid increase in the cost of living, but wages are not keeping pace with the increase in cost. The nation is experiencing A) disinflation. B) inflation. C) stagflation. D) stagnation.

C) stagflation. - stagflation: inflation + economy is not growing + rise in unemployment

An extended period of little or no growth in GDP, wages, and prices is a period of A) inflation. B) stagflation. C) stagnation. D) indignation.

C) stagnation. - stagnation: extended period of little or no growth; high unemployment

The most common way of measuring purchasing power risk is A) the DND. B) the GNP. C) the GDP. D) the CPI.

D) the CPI. - Consumer Price Index (CPI) measures increase or decrease in consumer prices

Gross National Product (GNP)

The total value of all goods and services produced by a country's economy in a given year. It includes all goods and services produced by corporations and individuals of a country, whether or not they are located within the country.

which of the following would be a leading economic indicator? a. S&P 500 Index b. Industrial production c. duration of unemployment d. Gross Domestic Product (GDP)

a. S&P 500 Index - stock market (S&P 500): leading indicator - coincident indicators: GDP, industrial production - lagging indicator: duration of unemployment

a measure of the change in economic activity that occurs over a given time frame within the boundaries of a nation is that nation's: a. gross domestic product (GDP) b. gross national product (GNP) c. consumer price index (CPI) d. industrial production

a. gross domestic product (GDP) - GDP: measure of activity WITHIN boundaries of a nation - GNP: measure of activity by the citizens and entities of a nation; activity doesn't have to occur there - CPI: measures inflation - industrial production: limited measure of activity

lagging indicators

indicators that change AFTER the economy has begun a new trend - serve as confirmation of new trend

leading economic indicators

indicators that tend to change direction AHEAD of overall economy

economics

the study of supply and demands

an economic environment with little or no economic growth, but where inflation is present is best described as: a. deflation b. depression c. stagflation d. stagnation

c. stagflation - stagflation: presence of inflation w/ high unemployment - deflation: prices drop; usually during recession or depression; high unemployment - stagnation: slow economy, often increasing employment; little price movement

real GDP

constant dollar (inflation adjusted) measurement and reflects actual growth

deflation

general decrease in prices

inflation

general increase in prices

stagflation

high inflation and high unemployment - rare - economy isn't growing; lack of consumer demand and business activity, but prices of goods rising

stagnation

prolonged period of little or no growth in an economy; + high unemployment