Economic Indicators

Economic Indicators:

Gross domestic production:

The gross domestic production is the value of goods and services produced in an economy within a period of time and usually the duration is one financial year of an economy; the GDP of country is measured using three methods, the income approach, the expenditure approach and the product approach.

According to the oil and gas production paper by Fady Mansour the GDP of the US has increased due to an increase in the production of oil in the US, production of oil has increased over the years and this has resulted to an increase in the GDP level which is an economic indicator.

This rise in oil production has been as a result of the Devon Energy company exploration efforts to increase the level of oil production, this company is the largest oil company in the United States and it produces over 600,000 barrels of oil each day.

The graph below shows the current trends of GDP in the US over the past five years:

Data was retrieved from www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm and it shows the relative percentage change from previous amounts. The GDP has increased over the years but declined in the year 2005 and 2006.

Economic Indicators

Unemployment:

Unemployment means those who are capable of working yet they are willing to work but do not find jobs, the level of unemployment is also an economic indicator which shows the level of idle resources in the economy, the level of unemployment is measured by dividing the number of the unemployed with the total labor force in the economy and the result multiplied by a hundred.

According to the case study by Fady Mansour the level of unemployment has increased this year compared to the previous year 2006, there has been slow economic growth that has been indicated by higher inflation and unemployment levels.

The historical unemployment data is shown below in the graph, data was retrieved from www.f orecasts.org/data/data/UNRATE.htm

Inflation:

Inflation is the persistent rise in prices in the entire economy for an extended period of time, according to Keynes there are two types of inflation which include demand pull and cost push, according to the report there has been an increase in the level of inflation as indicated by the consumer price index which is used in the calculation of the inflation rate, there has been a rise in inflation this year compared to the previous year inflation level.

Economic Indicators

The price of oil increase in mid months of the year 2006 leading to an increase in inflation by 1.9%, therefore an oil shock leads to inflation in an economy because it a major input in production in the economy.

Below is the consumer price index trend over the years, data was retrieved from www.forecast s.org/data/index.htm

Capacity utilization:

Capacity utilization refers to the extent to which the economy utilizes its resource including labor, capital and land which are factors of production, when an economy utilizes all its capacity then the company is said to be at full employment, however no economy has ever achieved this status, the diagram below shows the production possibility curve and shows the level of capacity utilization:

The above diagram shows the production possibility curve; point A shows under utilization of an economies capacity, point B shows efficient utilization of capacity while point C is unachievable.

Producer price index:

Economic Indicators

The producer price index helps to calculate the cost of production in an economy, if the cost of production rise then the level of prices in the economy will rise, when prices rise then this will result into inflation due to the rise in price in the entire economy, the producer price index has increased over the recent years due to an increase in oil prices in the economy.

Below is the trend of the PPI over the years and data was retrieved from www.forecasts.org/da ta/index.htm

S&P500

The standard and poor 500 is also an economic indicator of the economy, this index contains 500 stocks that are chosen in the market, they act as an indicator of returns and risk of investing in stock, and they are economic indicators in terms of investment and finance. Below is the historical trend of the S $ P 500 indicator which was retrieved from www.forecasts.org/data/ind ex.htm

Economic Indicators

REFERENCE:

The forecast organization (2007) data on US economy, retrieved on 20th August, available at w ww.forecasts.org/data/index.htm

The statistic center (2007) the GDP levels of the US, retrieved on 20th August, available at ww w.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Philip Hardwick (2004) Introduction to Modern Economics, Pearson Press, New York