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Key Macroeconomic Indicators - Coggle Diagram
Key Macroeconomic Indicators
Introduction to Macro
Macroeconomics is the study of the performance of national economies and the policies that governments use to try and improve that performance
The aim of every society is maximisation of societal welfare
From an macroeconomic perspective, this is referred to as a
rise in living standards.
In macroeconomics,
governments are the key economic agents
that intervene with macroeconomic policies in order to achieve
macroeconomic aims
such as economic growth, price stability, low rate of unemployment and a favourable balance of payment.
Hence we will be studying the macroeconomic
aims, issues and policies
relating to growth, inflation, unemployment, exchane rates, balance of payments and income distribution.
We will also study the
impact of global (external) trends and developments
on the national, regional, international economies and their implications on policy choices and decisions of governments.
First, the Key Economic Indicators used by economists include economic growth rate, inflation rate, unemployment rate and balance of payment (BOP) statistics.
Economic Growth
In macroeconomics, instead of the PPC, actual economic growth can also be illustrated with the aggregate demand and aggregate supply framework.
Introduction
Economic growth occurs when there is an increase in production of goods and services in an economy and a concurrent growth of national income.
This goes towards the ultimate aim of raising consumption levels to improve living standards of society.
However, bluntly increasing output levels may result in unintended negative consequences on society. Therefore, there is also a need to promote sustainability and inclusiveness of growth.
In measuring economic growth, we are concerned with the value of the total production in an economy. This is known as the National Product = total income earned by workers = total spent by consumers.
This gives economists alternative wars of measuring economic growth - the product approach, income approach, expenditure approach.
GDP
GDP is market value of all final goods and services newly produced within the geographical boundary of an economy in a given period of time.
Rate of change of GDP can be used to find rate of economic growth.
Limitations of GDP
GDP figures understate the nation's output as production of some goods and services go unrecorded.
GNI
Gross National Income is the market value of all final goods and services newly produced anywhere in the world from resources belonging to residents of a country in a given period of time.
Price Stability
Inflation is a situation where there is a sustained increase in the general price level.
Deflation is a situation in which the prices of most goods and services are falling over time.
Consumer Price Index (CPI)
The Consumer Price Index measures the price of a fixed basket of goods and services commonly purchased by a typical household.
Inflation rate
= ((CPInow - CPIlastyear )/ CPI last year) * 100%
Full employment of resources
is a macroeconomic aim because with full and efficient utilisation of resources society can produce the max amount of goods and services for citizens to enjoy.
Unemployment rate
= (no. of unemployed ppl / labour force) *100%
Balance of Payments is a record of a country's international transactions, which can be in a deficit or surplus. Changes in BOP are related to changes in exchange rate.
Living Standards and its indicators
