GDP and the Business Cycle Economic Health Memo Term Paper

GDP and the Business Cycle Economic Health Memo - Term Paper Example The business cycle, predictive statistics and government policy are obviously all intertwined. GDP and the business cycle are closely tied together. But how much? Is GDP actually good at predicting the future of the market? And what do the commensurate fiscal policies do to the economy? GDP is different from GNP. GDP is the domestic product: It is all the things and services that were produced domestically, no matter who owned them, even if it was foreign buyers. GNP, meanwhile, is the amount held by the nation, including the value of its overseas investment. GDP is about the borders of the nation, GNP about the national ownership. But both are used to predict the business cycle. GDP is designed to help firms manage uncertainty (Roubini). By getting a feeling for how the whole economy is doing, business managers can decide whether or not to pursue risky policies or batten the hatches and wait for things to get better. In general, markets go through boom-bust cycles about every twenty years (Mead, 1992). Knowing how GDP is doing now helps to predict if we're in a boom or a bust, which is important to the business cycle. However, GDP's value as an economic indicator, and therefore a predictor of the business cycle, is coming under attack now. Roubini, for example, points out that, â€Å"The best advice I can give you is to realize that there is an unavoidable amount of uncertainty in the economy. This is even more true of firms and their financial statements. So what do we do? My choice is to get out of this game altogether, but not everyone has this option---a firm, for example, has to forge ahead the best it can. The first thing you should know is that there's a lot of uncertainty out there, and no amount of commercial forecasting is going to change that†. Roubini is saying that GDP isn't ever for certain: It can be determined one year then the same year can be revised a whole percentage point later! It's hard to predict things like wars or terrorist att acks. In fact, GDP is very easy to â€Å"game† (Ritholtz, 2010). â€Å"[Y]ou simply under-report inflation, and GDP appears to be better than it is†. Since inflation depends on counting the value of a good last year, and doing so across many goods to make sure that it's not just one or two goods that grew in price for other reasons, there's a lot of subjectivity and uncertainty in making it. GDP is also not as helpful as it could be because it positively counts negative externalities (Ritholtz, 2010). That means that pollution, which is a bad thing, is counted as a good thing because it makes people spend money to go to the doctor or buy new houses to move. â€Å"If you buy a car, the GDP goes up. If you cut a tree, the GDP goes up. But if you preserve the tree, the GDP does not grow. Now you have to decide whether you need the tree or the GDP† (Sharma, 2010). Thus, it is hard to use the GDP to predict the business cycle, and economists are looking for a better indicator of economic health. Fiscal policies are guided by economic facts and by measures like the GDP: As we've seen already, the GDP's inadequacies can cause lawmakers concerned only with increasing the GDP to increase externalities such as injured workers, ecological damage and health costs as a byproduct, and not reap the consequences or even be aware of them. But what about fiscal policy and unemployment? The jury is out as to whether reducing or increasing taxes, reducing or increasing spending, etc. is better for production and employment. A major Heritage Foundation study finds that â€Å"a large and growing government is not conducive to better economic performance. Indeed, reducing the size of government would lead to higher incomes and improve America's competitiveness† (Mitchell, 2005). Mitchell cites a Rahn curve, which says that there's a curve in tax revenue between 0 and 100%. The theory is simple: If you tax 100% of income, no one produces anything; but if y ou tax 0%, the government

Electronic Art Inc. Analyst Report Assignment Example | Topics and Well Written Essays - 2500 words

Electronic Art Inc. Analyst Report - Assignment Example Today, the company is one of the largest interactive entertainments that deal with the software companies (Zippay, Lori 87). The company is located in CA 94063 in Redwood City. In 2001, Electronic Arts acquired pogo.com. Pogo is at the forefront in offering the services of online family games with nearly seventeen million members who are registered. Because of the company’s popularity, most leading research companies names the acquired firm as one of the stickiest web pages in 2000. But the financial details of the deal remained disclosed. In 2000, the company released The Sims, which was rated as the best-selling personal computer game of all time. In 1998, the company announced that it had signed a deal to buy all the outstanding stock of a company called the Westwood Studios. Additionally, it bought the Virgin Interactive Entertainment studio assets. Virgin Interactive Entertainment is one of the branches of Spelling Entertainment Group. The transaction cost was valued at 1 22.5 million dollars. COMPANY PROFILE Ticker symbol The video game maker company changed its NASDAQ stock exchange from â€Å"ERTS† to â€Å"EA†. The ticker symbol was made effective on Thursday 15th Dec 2011. Therefore, the current ticker symbol for Electronic Arts is â€Å"EA† Mission Statement The mission statement for Electronic Arts is â€Å"We are an association of Electronic Artists who share a common goal. We want to fulfill the potential of personal computing†. Corporate Headquarters The company is a global organization with development studios and offices that are located across the world. The company provides their employees with opportunities and avenues to leverage their talents across various locations of the world. The company makes sure that all workers in all regions are equipped with best investment, great facilities, and support to work while maintaining team spirit and creativity. The company has united locations to generate the passio n of creating great game software which fulfills the quest for entertainment ("Multimedia & Graphics Software Industry Leaders & Laggards: Industry Center - Yahoo Finance."). Electronic Arts operates its corporate headquarters in California in Redwood Shores. Its regional headquarters is in Singapore and Geneva Switzerland. Additionally, the company has worldwide studios in the following areas: United States ( Tiburon, Maxis, Mythic, Visceral Games, and All Play), Canada (All play, Bio Ware, EA Montreal, and EAC ), Europe (Galway, Criterion, Digital Illusions, Phonemic, and Bucharest), and Asia (Shanghai, Seoul, Hyderabad, Pandemic, Singapore, Melbourne) ("Multimedia & Graphics Software Overview: Industry Center - Yahoo Finance."). Date of Incorporation The company was founded and incorporated in 1982 May. The founder of the company was Trip Hawkins. Electronic Arts became the pioneer of the home computer games and was known for promoting the programmers and designers that are respo nsible for their own games. The company became the 3rd largest software companies for games after Activision Blizzard and Nintendo (Zippay, Lori 98). Electronic Arts Executive Name Position Andrew Wilson Chief Executive Officer Lucy Bradshaw Senior Vice President Maxis Frank Gibeau Executive Vice President EA mobile Blake Jorgensen Chief Financial Officer Joel Linzier Executive Vice Pr