Number of economic measures used to analyze economic conditions: Inflation Rate

Question

Number of economic measures used to analyze economic conditions:

Inflation Rate

Consumer Price Index (CPI)

The Interest Rate

Business Inventories

The Consumer Confidence Index

Index of leading Indicators

Gross domestic product (GDP)

Gross national product (GNP).

you are working for a company that is looking to expand its business globally from the United States.

Choose at least two of the above economic measures and describe how you will use them to make a decision about doing business in a specific country. You are free to choose any product or service.

Explanation / Answer

I will consider the following two factors to make business decisions:

I chose these two indicators as I think income (reflected by GNP) and the readiness of consumers to spend (reflected by Consumer Confidence Index) are two important factors determining business success.

How I will use GNP to make business decisions:

Gross national product is the market value of all goods and services produced by the citizens of a country in a given year. The GNP reflects the total income of the citizens of the country. Income is the most important indicator of the purchasing power of the citizens. Higher the GNP, higher is the general income level in the country. I will choose GNP to make business decisions because GNP reflects the general income and purchasing power of the citizens of the country. So, I would like to enter countries with higher GNP. They will provide much better business prospect to me because of the high purchasing power of the citizens.

How I will use consumer Confidence Index to make business decisions:

Consumer confidence index reflects how much optimistic the consumers are regarding the economy. Consumer confidence is reflected through the savings and spending behavior of the consumers. If the consumers are confident, they will spend more as they are relatively sure about income growth. Therefore, high consumer confidence will provide better business prospect to me. I would like to do business in countries having high consumer confidence as the consumers in those countries are ready to spend higher on goods and services. If the consumer confidence is low, it means consumers are more likely to spend less or delay spending. So, low consumer confidence does not pose business opportunity for me and I would like to stay away from such countries.

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