Question

Here are four industries and four forecasts for the macroeconomy. Choose the industry that you would expect to perform best in each scenario.Industries: housing construction, health care, gold mining, steel production. Economic Forecasts: Deep recession: falling inflation, falling interest rates, falling GDP. Superheated economy: rapidly rising GDP, increasing inflation and interest rates. Healthy expansion: rising GDP, mild inflation, low unemployment. Stagflation: falling GDP, high inflation.

Answer 1

Industries: housing construction, health care, gold mining, steel production.

Economic Forecasts:

Deep recession: falling inflation, falling interest rates, falling GDP.

Industry that performs best: Healthcare

Superheated economy: rapidly rising GDP, increasing inflation and interest rates.

Industry that performs best: Steel

Healthy expansion: rising GDP, mild inflation, low unemployment.

Industry that performs best: Housing Construction

Stagflation: falling GDP, high inflation.

Industry that performs best: Gold mining

Step-by-step explanation:

In a deep recession, the Healthcare industry will perform the best because the industry is not affected by economic cycles. Economic expansion or contraction does not have an impact on healthcare.

In a Superheated economy, steel production will perform the best out of these industries. This is because the industry runs parallel to economic cycles, booming when there is an economic boom.

The housing construction industry will perform the best in an economy that has a healthy expansion as this market is sensitive to interest rates. Investors will hedge against increasing interest rates by investing in property.

During a period of Stagflation , the gold mining industry will perform the best of these industries. Because this industry runs counter to economic cycles. When inflation is rising, investors seek a haven in gold.