Textbook Notes (362,837)
United States (204,245)
Economics (272)
CAS EC 102 (73)
Chapter 5

Chapter 5 Lecture GDP Part II.pdf

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Boston University
CAS EC 102
Jay Zagorsky

Chapter 5 Lecture: GDP Part II Thursday, February 6, 2014 3:30 PM GDP Part II - Why is tracking GDP important? ○ If income has not changed, it is a general problem or a specific problem? ○ GDP is simple indicator for how all businesses are faring  Compare growth to GDP over the same period - For detailed data of US; go to Bureau of EconomicAnalysis ○ In 1929 US produced less that $10,000per person ○ 80 years later, output per person is over 5x larger  Approaching $60,000(Inflation adjusted GDP per person) - Does it lead or lag GDP? ○ University enrollmentslag the business cycle ○ FedEx leads GDP so we should watch it ○ If your company is leading, the GDP peak/valley happens after the company's ○ If your company is lagging, the GDP peaks/valleyhappens before the company's ○ If your company is coincident, the GDP peaks/valleymatches  Many large diversified businesses - Why is GDP important? ○ Businesses need to predict by using GDP ○ Individuals need to know where to invest - Formal method to calculate GDP correlation ○ Between -1 and +1 ○ Positive1 means two series match perfectly ○ Zero means two series do not match at all ○ Negative 1 means two series are completelyopposite ○ Excel function = "Correl()" ○ FedEx Correlation  Correlation of the growth in FedEx sales to the GDP growth is 0.26  Correlation of the lag to growth in GDP is 0.10  Correlation of FedEx sales leading to GDP is 0.22  Largest correlation is coincident 0.26 □ Suggests the FedEx sales match US economy - US is not the richest place per capita ○ Norway and Switzerland have more ○ Huge difference between rich and poor ○ Ethiopia, Congo and Burundi is about $150 per year for a person ○ Microsoft'srevenue is larger than the GDP of all but the top 50 countries in the world - Real v. Nominal GDP ○ Nominal GDP:Values the production of goods and services at current prices ○ Real GDP: Values the production of goods and services at constant prices ○ An accurate view
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