See Bernanke and Kuttner (2003) or Kuttner (2001) for further details. Allowing for risk premiums creates another complication; see Sack (2002). I ignore these technicalities here. 3  Other financial instruments, such as eurodollar futures rates, can and have been used to forecast changes in the federal funds rate.
First, the rapid shift in the composition of gross domestic product towards idea-based value added is muddying our measures of current earnings and, hence, our projections of future earnings. The key definitional question that must be confronted is, what is a capital outlay? Conversely, what is an expense that, by definition, is consumed in the process of production and deemed an intermediate product?