edf40wrjww2CF_PaperMaster:Desc
Macroeconomic Forecast
Macroeconomic forecasting combines investigating and applying economic reasoning to the known, the unknown, and the unknowable. Forecasting has flaws because the future is by no means completely predictable, but economic indicators can help prepare for changes in the business cycle. These leading, lagging, and coincident indicators help foresee the business cycle so that the Federal Reserve (Fed) and government officials, as well as the business community, can anticipate and adjust to possible downturns in the U.S. economy. The business cycle is divided into the following phases: expansion or recovery, peak, contraction or recession, and trough. The indicators point to certain times in the business cycle. The leading indicators anticipate the direction in which the economy is headed. Coincident indicators offer information about the current condition of the economy. Lagging indicators occur months after a recession or expansion and help predict how long that particular phase will last (Fed 101, 2005). To assess the future of the economy and its impact on MPG construction, Team B weighed the forecasts of the Federal Reserve, the Congressional Budget Office, and the National Association of Realtors on GDP, inflation, unemployment, interest rates, and foreign exchange rates against hard currencies.
Recognized Forecasters
With the assistance of 500 economists and volumes of economic data (Nash & Duvall, 2005), the Fed is the forecasting group with the best opportunity to accurately predict the U.S. economy. The Fed predicted that the gross domestic product (GDP) for 2003 to 2004 would experience a growth between 4 and 4.4%. The Fed accurately predicted that ...