The Global Economy is an enormous place. Billions of dollars are being transferred every second. When an organization makes the decision to go global, a critical and informative analysis of this vast economy must be conducted to ensure the project is feasible and profitable. To safeguard their investments, companies use economic indicators to conduct a thorough examination of the global market. Economic indicators, by definition, are key statistics that indicate the direction of the economy. There are three key types: leading indicators, coincident indicators and lagging indicators (businessdictionary.com, 2015). This data is then used to measure the strength of the economy. Several key indicators that will be discussed are as follows:
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Supply refers to the amount of goods that are produced in a market, while demand alludes to the amount of goods that consumers are willing to purchase. For example, a car manufacturer perceives a demand for a new SUV. While conducting research, they come with a set price of $45,000. The company then produces 100,000 SUV’s. Consumers who want the SUV and find it valuable pay the full price and 1/3 remain unsold. Some view this price as too high and sales suffer. Due to the fact that companies lose money off of unsold products, the manufacturer reduces the price to $35,000 to increase purchases. The consumers go bout buying again. “This process begins until a price is reached that will both meet demand and maximize the company’s profits. That price is known as the ‘market-clearing price’”(whatiseconomics.org, 2015, P. 4). Equilibrium occurs when both supply and demand becomes balanced; resources reach their maximum efficiency. While supply and demand usually refer to the sale of products, however, it can be used to explain almost any economic phenomenon from a rise or drop in employment to an increase or reduction in available resources (whatiseconomics.org, …show more content…
Inflation is an increase in the price you pay for goods, but can also be seen as a decline in the purchasing power of money. There are two sides of inflation “price inflation and monetary inflation (McMahon, 2010). Price inflation is when prices rise or it takes more money to purchase the same item as before. Monetary inflation is an increase in the supply of money. When the supply of money increases, currency loses its purchasing power and services and goods increase. The Consumer Price Index (CPI) and the Producer Price Indexes (PPI) are two ways to measure inflation and can be found at the Bureau of Labor Statistics website (bls.gov,
Supply refers to the amount of goods that are produced in a market, while demand alludes to the amount of goods that consumers are willing to purchase. For example, a car manufacturer perceives a demand for a new SUV. While conducting research, they come with a set price of $45,000. The company then produces 100,000 SUV’s. Consumers who want the SUV and find it valuable pay the full price and 1/3 remain unsold. Some view this price as too high and sales suffer. Due to the fact that companies lose money off of unsold products, the manufacturer reduces the price to $35,000 to increase purchases. The consumers go bout buying again. “This process begins until a price is reached that will both meet demand and maximize the company’s profits. That price is known as the ‘market-clearing price’”(whatiseconomics.org, 2015, P. 4). Equilibrium occurs when both supply and demand becomes balanced; resources reach their maximum efficiency. While supply and demand usually refer to the sale of products, however, it can be used to explain almost any economic phenomenon from a rise or drop in employment to an increase or reduction in available resources (whatiseconomics.org, …show more content…
Inflation is an increase in the price you pay for goods, but can also be seen as a decline in the purchasing power of money. There are two sides of inflation “price inflation and monetary inflation (McMahon, 2010). Price inflation is when prices rise or it takes more money to purchase the same item as before. Monetary inflation is an increase in the supply of money. When the supply of money increases, currency loses its purchasing power and services and goods increase. The Consumer Price Index (CPI) and the Producer Price Indexes (PPI) are two ways to measure inflation and can be found at the Bureau of Labor Statistics website (bls.gov,