Economic Final Analysis

Essay by davelong13University, Bachelor'sA, June 2007

download word file, 16 pages 5.0

Our final economic analysis is composed of the six major economic indicators that play an important role for the housing industry. These are Capacity Utilization, Income, Price, Inflation, Unemployment, and Gross Domestic Product. Furthermore, we will conduct an in-depth analysis based on the forecasts acquired in week 4 to determine future strategic initiatives. We will also discuss the SWOTT analysis (Strengths, Weaknesses, Opportunities, Threats, and Trends) conducted during week one in conjunction with the definitions of the six economic factors already mentioned. It is also important to point out that other factors could alter the future of the housing industry; such is the case of the "bubble burst", location, technology, and rising interest rates in correlation to supply and demand of housing.

Capacity Utilization Rate(CU)A measure that economists can employ in union to the Unemployment rate is the Capacity Utilization rate. This percentage measure is used to determine "the rate at which factories and machines are operating compared to the maximum sustainable rate at which they could be used…" (Colander, 2004, p.

504). Using this measure tells us that apart from labor, there are other assets or capital that are on hand to promote economic growth. These two figures used jointly assists in identifying the Potential Output. This "is the output that would materialize at the target rate of unemployment and the rate of capacity utilization" (Colander 2005, p. 504). Economists use this percentage to assess the pace of the economy. An 80% CU rate with a 5% Unemployment rate is an acceptable pace economists are willing to accept. The theory stipulates that increasing this CU rate would result in inflation and a low CU rate may indicate a recession. Figure 1 below illustrates a 4-year history of this measure.

(Figure 1)However, some are theorizing that the economy can...