Essay on Three Economic Factors

Introduction

The economy is affected by many factors that influence the traders, investors, and the environment as a whole. Notably, three main economic factors are thoroughly examined to make precise decisions in the market. The economic factors have the most influence on the market performance thus creating a long-term circumstance. The is economic data calculated in the United States of America on a daily basis due to the changes in economic status due to these three main factors. These primary factors include; inflation, labor market, and GDP (gross domestic product). First and foremost we start by discussing on the labor market considered to be a significant factor. Most investors examine the condition of a particular nation on the employment and unemployment numbers. The employment and unemployment report on the United States economy is done monthly to provide the actual figure of either employed or unemployed people. At most instances, there are higher levels of unemployment as compared to the employed levels. When the allocation of resources changes, it leads to investments levels changing gradually. Most of the employed people exit the market due to the pulling out of some investors. This gradual exit leads typically to a level of unemployment termed as natural.

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When the level of employment has been established to be naturally, it means there is a drop in the figure of employed people thus creating a rise in inflation rates. The natural environment of USA is not in a precise condition due to disagreements on the percentages. In the 1980s most people took the natural rate to be at 6 percent, but the real investors now but it at around 5%. There has been a reduction in the unemployment levels due to the aging people getting permanent employment. Also, the temporary staffing companies and the imprisoned populations have been considered to be the factors influencing the labor market.

Secondly is on a Gross Domestic Product which is the value of all services and goods produced in a given nation in a specified period. The measurement of GDP is done by either adding the all spending or income earned in an economy of a country. GDP includes; taxes, interests, corporate profits, and wages and salaries. The domestic expenditures of GDP include; housing investment, business spending, government spending, consumer spending, and the subtraction, of import spending from the export spending. The GDP affects stock market due to the effect on inflation. The growth of GDP creates an increase in the purchase of stock by investors. On the other side, when there is a decrease in GDP the economy tends to grow slowly due to the decreased sales of the stock in the market by investors. Economic theory supports GDP to be a factor in suppressing of the stock market. When the stock market falls, there is drastic fall in the GDP, it then furthers influence the stock market leading to the unstable economic situation.

The third factor is on the inflation factor to the economy of a nation. Inflation determines the real value of investment losses and the returns needed to be compensated due to the losses incurred. Inflation has impacted considerably on the stock prices due to the effects brought about by earnings of individual firms. Low inflation maintains a firm's costs down and increments on their profits. Most economists impress that it is better to have low inflation in the market as to have higher inflation. The causes of inflation from supply-demand view due to an increase in demand for a product, increment in the firm's supply costs and fear of reduction in the supply of a product. The most vital importance of inflation is output gap, which balances both supply and demand in an economy. The capital and labor are the two main factors used by the output gap in measuring of difference on economy's potential. The measure of inflation is done in the US by use of Consumer Price Index to control on the system and price description to reduce on the exploitation. It is done monthly by determining the price of specific products and goods. The value gotten in the basket is compared with the of another basket price of one year. The value gotten for the whole is determined as the inflation rate. The inflation rate is thus used to measure the actual necessities used by the population.

Conclusion

Conclusively, all these three factors have got relation due to the influence each has on the other. The three affects the economic status of a country on either side. Therefore all these factors help in the creation of control system and price control structures. The economy of any given country depends immensely on the above economic factors for existence a competitive world we have today.