Interpreting Micro-Economic Conditions

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Indicators of Micro-economic conditions in economy (Quarterly). |Economic Indicators |Dec’2010 |Mar’2011 |Jun’2011 | |GDP Growth (In Billion) |14,755.0 |14,867.8 |14,996.8 | |GDP (Changes in %) |2.3 |0.4 |1.0 | |Unemployment(Million) |14,637 |13,542 |14,086 | |Unemployment (Change in %) |9.4 |8.8…show more content…
When an individual's income increases, other things remaining the same, that person will demand more goods and services; thus increasing their consumption. The degree to which a person or economy will spend more of their income on consumption is called the marginal propensity to consume (MPC). The MPC depends on the individual's economy's savings characteristics. As regards in inflation rate are higher that income rate, the increase of income will no positive effect in economy. Interest Rates: Interest rate have been decreased both the first quarter (0.18%) as well as second quarter (0.09 %) Interest rates are defined in several different ways. There is the rate for real interest which is the nominal interest rate adjusted for expected inflation. This is the rate which influences a firm’s investment decisions. Changes in nominal interest rates are felt within the consumer community as adjustments to the cost of borrowed funds. i.e. lower federal interest rates equate to lower mortgage rates. When the mortgage rate is lower, people are more inclined to purchase a home. In the case of consumer interest rates (revolving credit), reduced rates allow for larger purchasing power as well. When credit card rates are lower, purchasing is higher. Higher purchasing increases retail sales thus directly impacting the retail industry. Higher interest rates tend to drive consumers to tighten spending and thus impact in a negative manner. Both the housing
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