macroeconomic-indicators

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An Introduction to Macroeconomic Indicators

Each of the macroeconomic objectives has at least one metric that is used to measure progress towards that objective
- These metrics are called macroeconomic indicators
- Macroeconomic indicators provide a snapshot of the economic performance
The data from the macroeconomic indicators helps policymakers, economists, investors and businesses make informed decisions

Diagram: Macroeconomic Indicators

Flowchart depicting measures of macroeconomic indicators: balance of payments, unemployment, inflation, and economic growth with associated metrics. — **Indicators used to measure and track macroeconomic objectives include the Claimant Count and the Consumer Price index**

Policymakers use the data from economic growth, inflation, unemployment, and the balance of payments to assist in formulating and evaluating progress towards their objectives
The indicators provide a means of making historical and international comparisons

Measures of Economic Growth

Economic growth is one of the main macroeconomic goals that the government aims to achieve
- A steady increase in national output can help achieve other goals, such as lower levels of unemployment
Three common indicators used to measure economic growth are
- Nominal GDP
  The value of all goods and services produced in an economy in a one-year period

Real GDP
This is nominal GDP that is adjusted for inflation. E.g. If nominal GDP is £100bn and inflation is 10%, then real GDP is £90bn
Real GDP per Capita
The real GDP is divided by the total population of a country so as to give an average $ amount of real GDP/person. E.g. Switzerland ($93,657) has a much higher GDP/capita than Burundi ($238)

Worked Example

Using the information from the table below, calculate the GDP per capita for Costa Rica to nearest dollar bracket

[2 Marks]

GDP Data for Costa Rica, UK & USA 2015/2016

	Costa Rica	UK	USA
GDP (PPP $bn)	69.6	2 518.1	16 890.2
Population millions	4.9	64.7	321.8

Step 1: Insert values into the formula and solve

$Real space GDP space per space capita space equals space fraction numerator Real space GDP over denominator Population end fraction equals space fraction numerator $ 69.6 space biilion over denominator 4.9 space million end fraction equals space $ 14 comma 204.08$ [2]

Examiner Tips and Tricks

When giving the answer, always include the currency (dollar sign $), round to the nearest dollar and give full numerical value (billion/bn).

Worked Example

The table contains data for the rates of growth of nominal and real GDP and the rate of inflation for an economy in a given year. Which one of the following combinations, A, B, C or D, shows the correct relationship between the three variables?

Answer	Nominal GDP Growth	Real GDP Growth	Inflation
A	-3%	0%	+3%
B	+5%	+3%	-2%
C	-4%	-2%	-2%
D	+4%	+4%	+1%

Step 1: Substitute the values for each answer into the following formula

<img alt=”Inflation space equals space Nominal space GDP space minus space real space GDP
Inflation space straight A space should space be space minus 3 percent sign space so space the space answer space is space incorrect space open parentheses negative 3 percent sign minus 0 close parentheses
Inflation space straight B space should space be space plus 2 percent sign space so space the space answer space is space incorrect space stretchy left parenthesis 5 percent sign minus 3 percent sign stretchy right parenthesis
Inflation space straight C space should space be space minus 2 percent sign space so space the space answer space is space correct space stretchy left parenthesis negative 4 percent sign minus space open parentheses negative 2 percent sign close parentheses stretchy right parenthesis” data-mathml='<math style=”font-family:Arial” ><semantics><mstyle mathsize=”16px”><mi>Inflation</mi><mo> </mo><mo>=</mo><mo> </mo><mi>Nominal</mi><mo> </mo><mi>GDP</mi><mo> </mo><mo>-</mo><mo> </mo><mi>real</mi><mo>a

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macroeconomic-indicators

An Introduction to Macroeconomic Indicators

Diagram: Macroeconomic Indicators

Measures of Economic Growth

Worked Example

Examiner Tips and Tricks

Worked Example

Responses