Essay on Divisions of The Field of Economics

Essay on Divisions of The Field of Economics

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Economics is the science that permits you to assess your company's position in the business cycle as needed. Economics works hand-in-hand with corporate strategy. While strategy addresses the “how” and “why” of business decision-making, macroeconomics tries to pinpoint the “when” of strategic decisions.
As a member of the management team in a growing business part of your responsibilities will be to analyze economic conditions and predict recessions and recoveries based on the business cycle. If you anticipate a recession, you will probably propose cutting production and trimming inventories. You may even have to downsize the company, either by layoffs, hiring freezes, curtailing capital spending, or any combination of the three; in anticipation of reduced cash flow and higher borrowing costs.
You must also be able to recognize the signs of an approaching economic recovery, and use the opportunity to hire talented workers from the pool of available labor at lower wages before your competition does; and make needed capital expenditures using low rate loans, possible because of stimulus monetary policies, to increase market share, or acquire rivals or complementary businesses at reduced prices.
Our first objective is to develop an understanding of tools, theories, and techniques used in macroeconomic analysis. These will allow us to understand how to measure economic growth, productivity, and inflation. What is the impact of budgetary and trade deficits on these factors? How do changes in fiscal and monetary policy affect the length and strength of the current business cycle? If we are an active exporter, or produce components for a company that exports, how do exchange rate policies affect prices and overseas competitiveness?
You w...

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...s the economic outlook, uses an algorithm that consolidates data generated by more than 40 monthly forecasts. The projection also makes use of 15 macroeconomic variables including GDP, the CPI, the unemployment rate, and interest rates. Survey participants consist of major institutions like Chase Manhattan Bank, UCLA, and DuPont.
The Blue Chip Consensus Forecast has performed better historically than any individual forecast used in its sample. The individual indicators included in the survey have, on their own, missed important turns in the business cycle.
These suggest three possible courses of action:
1. It is unwise to rely exclusively on a single macroeconomic forecaster
2. The blue Chip consensus forecast is more accurate than any of its components
3. There are other tools that perform as well or better in predicting changes of direction in the business cycle

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