Five Things to Watch on the Economic Calendar - 550 Words

Five Things to Watch on the Economic Calendar (Coursework Sample) Content: ANALYSIS OF THE FIVE THINGS TO WATCH ON THE ECONOMIC CALENDAR USING IS-LM MODELBy:School:Date:Five Things to Watch on the Economic Calendar This paper analyses the article posted on the Wall Street Journal by Kathleen Madigan on 1st May, 2015 concerning five things that should be watched by the citizens and watchers concerning the economic activities that were expected to emeage based on the employment report that was released. This report was believed to have effect on the economic growth of the first quarter. The five things to watch that were listed by the author of the article include expectation of April Thaw in job growth, the trade numbers in March were expected to inform the GDP calculations, the imporatnce of the investors, projected drop in the productivity, and the demand by the watchers that Fed unvails the data and reports that will inform the policy of the decision makers. The author of the article argued that there was increase in jobs to 220,000 slot s in April after 126,000 slots were added in March based on the employment report that was released by the Labor Department. In addition, the unemployment rate also decreased from its level of 5.5 % in March to a level of 5.4 % in April. It has been reported in the article that there was a slow down in the economic activities which showed a decrese in the lvels of exports and imports in the late 2014. As such, there was a substraction 1.25 % from the GDP growth in March. This indicates that failure by the trade gap to widen in March indicated a drag in the GDP growth. It was also reported in the article that factory inventory was estimated by the department of Commerce to decline while the wholesalers merchandise were to increase, and in overall, the GDP shrank. It was also reported that the productivity lagged and it even worsened in the forth quarter of 2014 when the it fell by 2.2%. Lastly, the watchers expected the Fed officials to speak on the data and policy that will inform the economic decisions in which the interest rate were expected to be lowered. Application of the IS-LM Model in the Analysis of the Article The five things to watch on the economic calendar that have been discussed above can be analysed using the IS-LM model, which shows the interaction that exists between the money market and the market for goods and services. To begin with, expectation of April Thaw in job growth in which the unemployment rate decreased form 5.5% to 5.4% while jobs increased to 220,000 is an indication of a growth in the GDP of the economy from, say, Y1 to Y2. This affects the market economy for goods and services and causes a shift in the IS curve to the right from IS1 to IS2, while interest rate increases from i1 to i2 as shown in the figure below. Interest rate(r) LM i2 i1 IS1 IS2 Y1 Y2 Real GDP (Y) A slow down in the economic activities which was marked by a decrease in the level of b oth the exports and imports led to the contratcion of the economy making the GDP to decrease. This scenario can be illustrated using the IS-LM model as shown ...