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Interpreting Micro Economic Conditions Essay

1315 words - 6 pages

Indicators of Micro-economic conditions in economy (Quarterly).
|Economic Indicators |Dec’2010 |Mar’2011 |Jun’2011 |
|GDP Growth (In Billion) |14,755.0 |14,867.8 |14,996.8 |
|GDP (Changes in %) |2.3 |0.4 |1.0 |
|Unemployment(Million) |14,637 |13,542 |14,086 |
|Unemployment (Change in %) ...view middle of the document...

S. economy is by looking at Gross Domestic Product (GDP), which is the statistic used to measure the economy. In other words, the U.S. economy, as measured by GDP, is everything produced by all the people and all the companies in the U.S. In the second quarter of 2011, the GDP was 0.4 which was decreased in compare to December 2010. Though the GDP was slightly increased in second quarter, as regards in inflation rate was increased both first quarter and second quarter, the sign are not good for healthy economic.
Unemployment: The unemployment rate in second quarter was increased 9.2% as compared to 8.8% in first quarter. Unemployment affects the economy in ways that most people do not visually see. If more people are unemployed, less people pay taxes or have money for spending. Spending money boosts the economy through taxes which is why everything is taxed. The taxed money adds up when everyone shops. If one is unemployed, they live on what is saved or what unemployment departments give them. Therefore, they do not have money to be frivolous, they only buy necessities.
Consumers Price Index: On a seasonal adjusted basis, the CPI-U increased 0.05 percent in second quarter of 2011 as compare to December 2010. It was decreased in December 2010 and also decreased again in second quarter in 2011.  This index is considered to be one of the most accurate indicators of confidence for consumers. A drop in the CCI indicates pessimism in the consumer area. This equates to a direct impact on the spending habits of consumers. An increase in the CCI would also affect the spending habits of consumers. Personal wealth and consumer credit are impacted by the CCI as well. Changes in personal income are part of the CCI and changes in personal income affect the spending habits of the public. An increase in personal income results in an increase in spending.
Income: Income was slightly increased in first quarter (0.5 %) as well as second quarter (0-2 %) of 2011. When an individual's income increases, other things remaining the same, that person will demand more goods and services; thus increasing their consumption. The degree to which a person or economy will spend more of their income on consumption is called the marginal propensity to consume (MPC). The MPC depends on the individual's economy's savings characteristics. As regards in inflation rate are higher that income rate, the increase of income will no positive effect in economy.

Interest Rates: Interest rate have been decreased both the first quarter (0.18%) as well as second quarter (0.09 %) Interest rates are defined in several different ways. There is the rate for real interest which is the nominal interest rate adjusted for expected inflation. This is the rate which influences a firm’s investment decisions.  Changes in nominal interest rates are felt within the consumer community as adjustments to the cost of borrowed funds. i.e. lower federal interest rates equate to lower...

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