Download Economic Indicators

Economic Systems in the
United States
SOL GOVT.14 The student will demonstrate
knowledge of economic systems
SOL GOVT.15 The student will demonstrate
knowledge of the United States market
economy.
SOL GOVT. 16 The student will demonstrate
knowledge of the role of government in
Virginia and United States economies
Formulation of Economic Policies
How do government officials make
decisions about Fiscal and
Monetary policy?
Requires an understanding of
accurate measures of the
economy’s performance, known as
“Economic Indicators”
Economic Indicators:
Economic statistics which
indicate how well the
economy is doing, and
how well the economy is
likely to do in the future
Economists try to read the
trends to know what the
economy will look like in
the future
“Leading economic
indicators” are
indicators which
change before the
economy changes,
(like the stock
market) and
indicate the
economic future
Economic Indicators:
1. Gross
Domestic
Product (GDP):
the total dollar
value of all final
goods and
services produced
in the United
States in a year
World Rank in 2016
1. United States $18.5 trillion
2. European Union
$17.1
3. China
$11.4
4. Japan
$4.71
5. Germany
$3.49
6. U.K.
$2.65
7. France
$2.49
8. India
$2.25
9. Italy
$1.85
10.Brazil
$1.17
2. Per Capita GDP
A measure of the total output of a
country that takes the gross domestic
product (GDP) and divides it by the
number of people in the country.
Per capita GDP shows the wealth of
one country’s citizens in comparison to
other countries.
Per Capita GDP
2016 source: The World Bank
1. Qatar
$132,870
2. Luxembourg $99,506
3. Singapore
$85,382
4. Brunei
$79,508
5. Kuwait
$70,634
6. Norway
$68,887
7. UAE
$67,217
8. Ireland
$65,629
9. SanMarino $62,938
11. United State $56,084
152. Burundi
148. Liberia
139. Afghanistan
124. Pakistan
120. India
91. Ukraine
77. China
60. Mexico
48. Russia
15. Canada
$267
$454
$678
$1,299
$1,499
$3,900
$6,670
$10,307
$14,612
$43,914
3. Consumer
Price
Index
(CPI)
The End
measures the monthly price changes of the
“market basket”: food, apparel, utilities,
and education
The annual
percentage
change in the
CPI is used as
a measure of
INFLATION
1.6%
4. Inflation Rate
Inflation is a rise in the general level of
prices of goods and services in an economy
over a period of time
*Reflects the erosion in the purchasing
power of money
Deflation occurs when the inflation rate falls
below 0% and causes a fall in the general
price of goods
5. Unemployment Rate
Measures Joblessness: number of people who are
without work and are actively seeking work
*Reached by dividing the number of unemployed
people by all people currently in the labor force
Unemployment
reached 25% in U.S.
during the Great
Depression of 1930
to 1940
Current Unemployment in U.S.
Both the national rate (4.6%) and the number
of unemployed persons is down from 7.2% in
Oct 2013
Subgroup rates:
Bedford County 4.5%
Teenagers (23.1%)
Lynchburg 5.4%
Blacks (15.8%)
Virginia 4.7%
Hispanics (11.0%)
+280,000 jobs per month over
Adult women (7.9%) last 3 months-Fed may raise
Whites (7.5%)
interest rates to slow econ…
New York
Stock Exchange
*located on Wall Street in NYC
*Responsible for setting policy,
supervising members, and listing
“securities” (stocks, bonds)
The oldest and largest
stock exchange in the
U.S. founded in 1792
Stock Market
Averages
6. Dow Jones Industrials
shows how 30 large publiclyowned American companies
have traded during a
standard trading session in
the stock market
*Closed at 19,216 12/5/16
-17,847 on 12/4/15
-13,712 on 1/22/14
Some companies:
AT & T
Boeing
Coca-Cola
Dupont
Exxon-Mobil
Home Depot
Intel
IBM
McDonalds
Microsoft
Verizon
Walmart
Walt Disney
7. NASDAQ Composite
Averages stock prices of over 3,000 companies.
An indicator of the performance of stocks of technology
companies
*Dot-com Bubble (1997-2000): NASDAQ closed over
5000 in March 2000 but the market collapsed from
there…
Amazon.com stock went from $107 to $7 per share, but a
decade later exceeded $200-MANY other companies
went out of business.
Closed at 5308.89 on 12/5/16
(up over 20% since end of 2009 recession)
Dot-com Bubble: NASDAQ value doubled in 1 year!
Didn’t hit bottom until late 2002
8. S & P 500
Wether
Stock market index
based on the market
cap of 500 leading
companies publicly
traded in the U.S. stock
market, as determined
by Standard & Poor's.
Closed at 2204.71
Dec 5, 2016
Bell
Many consider it the
best representation of
the market as well as a
bellwether for the U.S.
economy
9. Barrel of
Crude Oil
A barrel consists of 42
gallons, which can be
processed into 19.5
gallons of gasoline, 9.2
gallons of heating oil,
15.7 gallons of kerosene,
motor oil, liquid propane,
lubricants, and asphalt
Current price
$51.36 a barrel
$39 a barrel Dec 2015
$96 January 2014
10. Gold
Gold standards have been the most
common basis for monetary policies
throughout human history
The gold certificate was used from
1863 to 1933 in the U.S. as a form of
paper currency. Each certificate gave
its holder title to its corresponding
amount of gold coin
Current price $1179 “per troy ounce”
$1080 in 2015, $1686 in 2013
11. Housing Market
Housing Starts: the number of privately-owned
new houses on which construction has been
started in a month > Leading indicator
*Up 23.8% in 2016, highest increase since 2007
• Mortgage Rates: the interest rate on a loan to
buy a single-family home
• A mortgage is the standard method by which a
person can purchase real estate without the
need to pay the full value immediately on their
own (historically paid off in a 30 year loan)
12. Retail Sales Report
• Total measure of the sales of retail goods in a
month
• Consumer spending responsible for nearly 70
percent of U.S. economic activity; driven by
Consumer Confidence
• The retail sales report captures store sales,
catalogue sales and internet sales, by categories.
• A “Leading Indicator” because it provides data that
is only a few weeks old.
Retail sales growing at 3.4 % in 2016
13. Foreign
Exchange
Rate
Rate at which one currency
may be converted into
another
*Used when someone
wants to convert currency
for travel to another
country
*Also, for speculating on
currency in the foreign
exchange market
$1 US = .93 Euro (.743 Jan ‘14)
1 US $ = 7.47 Chinese Yuan
$1 US = 1.33 Canadian dollar
14. Balance of Trade (BOT)
In Macroeconomics, BOT is the difference
between a country's imports and its exports
A country has a trade deficit if it imports more
than it exports; the opposite scenario is a
trade surplus.
The United States has been running consistent
trade deficits since 1980 due to high imports of oil
from the Middle East (Saudi Arabia) and
consumer products from China, Japan and “Asian
Tigers” and “Tiger Cub” nations
Comparative Advantage
Economic concept that says that a country should
specialize in producing and exporting only those
goods and services which it can produce more
efficiently (cheaper) than other countries can.
• Results from different endowments of the factors
of production (capital, land, labor), resources,
entrepreneurial skill, and technology.
• Beneficial to all countries (and world economy)
because each can gain thru voluntary trade by
specializing according to its comparative
advantage over other nations.
Voluntary Trade
Both parties experience
gains from voluntary trade and avoid
isolationism
Bottom line: Countries that trade with
the entire world are wealthier and their
citizens have a higher level of
satisfaction because of the gains they
realize from trade
Trade Agreements between nations
NAFTA: North American Free Trade
Agreement eliminated tariffs
between U.S., Mexico, Canada in
1994
*Will Trump impose 35% tariff??
WTO: World Trade Organization
represents 97% of world’s
economic activity