7.2. Economic Indicators

Economists make judgments about where in the business cycle the economy is by examining economic indicators. Economic indicators are statistics that summarize different aspects of the economy. The unemployment rate, the CPI, and the gross domestic product (GDP) are all economic indicators. Economic indicators are used to assess the future, current, and historical performance of the economy. The Federal Reserve uses economic indicators in making decisions about monetary policy.

For the Series 52, be sure to know what action the Federal Reserve may take when facing changes in various indicators. When in doubt, remember that the Fed is usually most worried about one of two things: a recession or runaway inflation triggered by an expansion. If the Fed is most worried about a recession, either because a contraction has b