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Project Macroeconomics Forecast Component Case Study


Compare and contrast differences for the respective statistics prepared by the forecasters

From the projection carried out by the CBO forecasters, the economic indicators seem to be at the highest between 2007 and 2010.

This could well be explained by the economic recession that commenced in 2007. In 2007 however, the unemployment rate given was 4.6% and inflation rate was 2.9%. Basically, an increase in inflation rate leads to increase in prices of commodities such as food and oil (Jones, 2009).

From the economic trend given by the forecasters, it is evident that the GDP experienced steady growth from the year 2007 to 2018.

Despite this trend, the unemployment rate was deemed to rise between 2008 and 2009. This could be attributed to the fact that, most of the firms were still recovering from the devastating effects of global recession and as such, put on hold employment thus aggravating the unemployment problem (Eisendrath, 2008).

Relationships amongst the selected forecasts

The table below shows the actual figures of the selected economic indicators from 2007 to 2009 and the projected figures from 2010 to 2018.

Table 1- CBO’s Economic Projections for Calendar Years 2008 to 2018

Period 2007 2008 2009 2010 to 2013 2014 to 2018
Nominal GDP (Billions of dollars) 13,843 14,358 14,946 18,278 22,625
Unemployment Rate 4.6 5.2 5.5 4.9 4.8
Consumer Price Index (Inflation rate 4.0 2.1 1.9 2.1 2.2

Sources: Congressional Budget Office; Department of Commerce, Bureau of Economic Analysis; Department of Labor, Bureau of Labor Statistics; Federal Reserve Board

In year 2007, at the given inflation rate of 4.0%, the unemployment rate was 4.6% and the GDP was 13,483 billion Dollars. Compared to 2008 and 2009, the inflation rate eased with increase in unemployment rate which could be explained by the decision taken by the firms to cut on the operational costs as they tried to survive the recessionary economic conditions (Pearce & Michael, 2006).

However, in 2010 to 2018 projections, the inflationary rate stabilizes between 2.1% and 2.2% and this sees firms employing more eventually leading to increased GDP.

Relationship between economic indicators based on the forecasts

Inflation, unemployment, interest rates, oil prices and GDP as economic indicators are closely related to each other.

This is because when inflation rates rises as shown at the onset of the recessionary period; it results to increased commodity prices and in most cases, to those products which are pegged on the dollar such as oil (Acharya, 2009). Further, at inflationary conditions, the general price level of all products rises hence lessening the consumer purchasing power which in turn adversely affects the MGM customers’ levels.

To contend with this, MGM resulted to downsizing in 2007 in order to cut on the operational costs. To correct this economic problem, the authorities through fiscal policies introduced high interest rates to mop up excess money in the economy and as such, people who had previously taken loans ended up paying higher finance costs leaving little if not none for savings.

Implications of forecasts on planning issues

On its strategies, MGM hotels plan to carry out massive expansion projects. These projects will cut through the years and as such, will be favored by the economic environment as indicated by the lower and stable inflationary rates (Green, 2009).

In addition, the business will expect to perform well as reflected by the increasing GDP. However, the business will experience shortages of staff on recruitment as shown by the lower unemployment rates since other firms will also be competing for the available labor force in the market.

Changes to minimize potential risks and maximize opportunities

Based on the CBO economic forecast, it would be advisable for MGM hotels to embark on the development project well early enough in order to take the advantage of the favorable economic conditions reflected by the forecasted improved GDP. More so, to avoid the problem of staff shortages as reflected by the reduced unemployment rates, the firm should get in advance the best skills available in the market.

References

Acharya, V. et al. (2009). A birds-eye view: The financial crisis of 2007-2009: causes and remedies. Financial Markets, Institutions & Instruments, 14 (2), 89-137.

Eisendrath, D. et al. (2008). Fear and managing in Las Vegas: An analysis of the effects of September 11, 2001, on Las Vegas Strip Gaming Volume. Cornell Hospitality Quarterly, 9(3), 145-162.

Green, S. (2009). City center deal sends MGM mirage stock soaring. Web.

Jones, P. (2009). Impact of the global recession on the hospitality and tourism industry. Tourism and Hospitality Research, 13 (2), 363-367.

Pearce, J. & Michael, S. (2006). Strategies to prevent economic recessions from causing Business failure. Business Horizons, 5 (3), 201-209.

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IvyPanda. (2019, May 20). Project Macroeconomics Forecast Component. Retrieved from https://ivypanda.com/essays/project-macroeconomics-forecast-component-case-study/

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"Project Macroeconomics Forecast Component." IvyPanda, 20 May 2019, ivypanda.com/essays/project-macroeconomics-forecast-component-case-study/.

1. IvyPanda. "Project Macroeconomics Forecast Component." May 20, 2019. https://ivypanda.com/essays/project-macroeconomics-forecast-component-case-study/.


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IvyPanda. "Project Macroeconomics Forecast Component." May 20, 2019. https://ivypanda.com/essays/project-macroeconomics-forecast-component-case-study/.

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IvyPanda. 2019. "Project Macroeconomics Forecast Component." May 20, 2019. https://ivypanda.com/essays/project-macroeconomics-forecast-component-case-study/.

References

IvyPanda. (2019) 'Project Macroeconomics Forecast Component'. 20 May.

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