The Economic Perspective: “Why Are Economic Forecasts So Different?”

Mary: This is Mary Walden with economist MW welcoming you to the economic
perspective. Today’s program asks why economic forecasts are so different. Mike, the
$1.9 trillion Covid relief plan that is being debated in Congress has caused economists to
revise their projections for how fast the economy will recover. Some forecasters say, if
passed, the relief bill will cause the economy to return to pre-pandemic levels by the end
of the year. Others say recovery won’t be that quick, and might even cause the economy
to shrink in future years. What’s behind these differing outlooks?
Summary Answer
a. Two factors
b. One is the size of the multiplier
c. Multiplier measures how much money is re-spent
d. Higher multiplier means a faster recovery
e. But some forecasters argue the multiplier is low due to households saving
much of their stimulus check
f. Other factor is what spending does to interest rates
g. If increase them, future growth will be slower
h. I’m MW
Mary: And I’m Mary Walden for the Economic Perspective, an NC State Extension
program from the Department of Agricultural and Resource Economics.