Question
1)a) Economic data and the signals they contain are central to business conditions analysis. As explained in the text and lecture, economists focus on two
1)a) Economic data and the signals they contain are central to business conditions analysis. As explained in the text and lecture, economists focus on two distinct types of signals: direct signals and indirect signals. Your first task is to explain in commonsense language, with examples that relate to the business activities of the industry in which you work or have worked in the past, what is meant by a direct signal and then what is meant by an indirect signal.
To expand the point further let's consider the very important macro indicators of employment and the wages that employment generates. To make it interesting let's also consider a different country - the tiny Kingdom of Bahrain.Several years ago Bahrain, like other developed Middle East producers of energy, went through some tough times. The softness in energy prices, which continues to this day, has left the economy unsettled. The most recent period for which we have reliable data is the second quarter of 2018-19. According to the Bahraini Labour Market Regulatory Authority's quarterly reports we have the following numbers for working Bahraini citizens (one BD, or Bahraini dinar, equals $2.67):
Indicator
2018Q2
2019Q2
Employment
158,814
153,103
Median Monthly Wage
BD538
BD532
Inflation, Year over Year
0.5%
b) Your next task is to set out the direct macroeconomic signals that are contained in these data. Tell me explicitly what the direct signals are about employment and wages in this 12-month period, and be sure to distinguish between real and nominal changes.
c) These data are useful because they may provide indirect signals as well.Speculate on what indirect signals we could get from these data. To assist you in organizing your answer, let me know what these data could mean for households, firms, and the government.If it would help, assume for the moment you are a Bahraini who runs, say, an automobile dealership - what might these data mean to you?Lastly, what possible effects would the behavior you describe in response to these data have on the economy as a whole?
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