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Durable Goods vs. Real GDP – What features do you observe – Starting in 1999, durable goods were directly correlated with real GDP. When GDP increased, durable goods did as well and vice versa. This indicates that the durable goods indicator is a direct reflection of how the economy is doing. When we are in bad economic times, less durable goods are purchased. We see this exact trend during the 2008 recession when there is a large dip in the real GDP as well as durable goods. During time of recession, consumer confidence is down, unemployment is up, and people are not purchasing goods other than necessary goods. When durable goods are increased, it is a sign of a flourishing economy which is reflected by a high GDP. Durable goods follow the economic cycle in that when durable goods are up, real GDP is up and vice versa. Durable goods actually leads to an increased GDP so the two are directly correlated. Nondurable Goods vs. Real GDP – The graph implies that nondurable goods, while they follow the trend of real GDP, they do not react as drastically as the peaks and dips of real GDP. This indicates the need for nondurable goods. Even during times of recession, people may not spend as much on things such as groceries but they still need to purchase them to live. Therefore, during time of recession, you will see a decline of nondurable goods but not as drastically as a decline in real GDP. Services vs. Real GDP – This portion of consumption is least affected by economic events that would affect real GDP. While real GDP takes drastic peaks and falls throughout the life of the graph, services remain fairly steady. This is due to the fact that services are not necessarily luxury items but are usually necessary for daily living. Additionally, services can be long term commitments and not as easily abandoned or switched for alternatives. Conclusion – Durable goods are most drastically affected by economic changes (most volatile) although it does drastically drop as the recession hits in 2008. We expect to see this trend as durable goods have the most alternatives while services are limited and usually more long-term. Essentially all three indicators make up consumption. It is evident that consumption is going to be affected by how the economy is doing. If we are in an economic recession, we expect consumption to decline. It will never fully get to the point of zero consumption as there are basic necessities, but certain indicators are more affected by economic conditions than others as shown in the graph. These patterns are important for firms because the indicators show the level of consumer confidence. It tells firms if they should promote growth in production and labor force versus a time of recession when firms may downsize. Economic conditions also imply what people will be buying. For example, during times of recession, women tend to purchase more beauty products (durable goods). To a firm, this is a determinate of what consumers will be purchasing during certain economic times.
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Durable Goods vs. Real GDP
By the year of 1999, GDP was mutually related with lasting goods and services. This explains
that both GDP and lasting goods were directly related to each other and this tries to explain that
long-lasting goods could be used to show the economy growth. During the depression, lasting
goods are not commonly purchased by consumers. The 2008 global recession is a good example
where long-wearing commodities were purchased and this led to a boom in the economy. Both
the long-lived or durable goods go hand in h...


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