intro to indicators

• Macroeconomics


  The study of the economy as a whole
• Economic indicator


  A quantitative measure of economic performance
• Macroeconomic objectives


  • Low and stable inflation
  • Low unemployment
  • Positive economic growth
  • Balance of Payments stability/equilibrium
• Secondary/minor objectives


  • Stable exchange rates
  • Eradication of poverty
  • Fairer distribution of income and wealth
  • Reduce the national debt
  • General economic stability
• Economic stability


  The avoidance of volatility in the main macroeconomic indicators such as unemployment rates, growth rates, inflation rates, and exchange rates
• Inflation


  A sustained rise in the average price level
• Measured by inflation


  Year on year % change in the average price level
• Low inflation means that wages and prices remain stable therefore firms are more likely to invest and the value of incomes doesn't erode as fast
• Economic Growth


  The increase in an economy's output over time
• Measured by economic growth


  Percentage change in real GDP/GNP (national income) per time period
• GDP


  The value of the total output produced in an economy over a given time period
• Positive growth means greater income in the future, more output and higher living standards
• Balance of Payments


  A record of all of an economy's financial transactions with the rest of the world
• Measured by Balance of Payments

  Financial inflows - Financial outflows
• When a deficit occurs (outflows>inflows) the economy keeps less of its income and may therefore grow slower, when a surplus occurs (inflow>outflows) we receive more income from other economies who may take action against us to keep their income. Therefore, equilibrium, neither deficit nor surplus is preferable in the long term
• But a CURRENT ACCOUNT trade surplus is often a medium term goal
• The Economic Cycle


  In the short term, real GDP fluctuates around the long term growth path of output. These fluctuations are known as the Trade Cycle, the Business Cycle or the Economic Cycle
• Phases of the Economic Cycle

  • Peak or Boom
  • Recession
  • Slump/Depression
  • Recovery