the measurement of macroeconomic performance

the objectives of government policies

• attain a reasonable balance of payments - avoidance or reduction of an external deficit between imports and exports

• achieve economic growth and improve living standards and level of economic welfare

• limit/ control inflation to achieve some degree of price stability - CPI of 2% each year

• create and maintain full employment or low unemployment

policy objectives

• target or goal that policy-makers aim to achieve

macroeconomic indicator

• data used to measure the performance of an economy

performance indicators

• provide information for judging the success or failure of a particular type of government policy

• I.e. is the current policy on target to hit future targets set for that policy

leading indictors

• provide information about the future state of the economy stemming from the current way people are forming current expectations

• surveys on consumer and business confidence and investment intentions provides the likely state of AD a few months ahead

lagging indicators

• provide information about past and current economic performance and the extent to which policy objectives have been achieved

• data on the level of GDP and current and recent employment and unemployment figures

index numbers

• numbers used in index such as CPI

• allows comparisons which are accurate to be made overtime

• consumer spending / base year consumer spending

national income

• the flow of new output produced by the economy in a particular time period

limitations of data to assess changes in living standards

• quality of goods may change - more being produced doesn’t necessarily mean better

• hidden economy

  • cash businesses due to tax evasion not taken into account

  • black market

• non-monetised economy

• data on ‘per capita‘ can conceal disparities in income distribution especially economically developing countries