Macroeconomic Indicators (AQA A Level Economics)

• 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: Measures of Macroeconomic Indicators 

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

• 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)

• Inflation is a sustained increase in the general price level of an economy
  
  
• The UK uses two inflation indices to measure inflation and each one is calculated differently
  • The consumer price index (CPI)
  • The retail price index (RPI)
     

 A Comparison of the CPI & RPI

• A worker is considered unemployed if they are out of a job and actively looking for one
  • Unemployed people who are not actively looking for a job would not be considered to be unemployed
     
• Unemployment is measured in many countries using two different approaches
  • The International Labour Organisation (ILO) Survey
  • The Claimant Count
     

The Differences Between the ILO Labour Force Survey & the Claimant Count

Three indicators used to Analyse the Labour Market in an Economy

• The employment rate could be increasing even as the unemployment rate is increasing
• This may be caused by increased immigration, which causes the working age population to increase
• This may be caused as people move from being economically inactive to employed
  
  
• Unemployment rates do not capture the hidden unemployment that occurs in the long term
• Workers look for a job but may eventually give up and become economically inactive
• This actually improves the unemployment rate, as fewer people are actively seeking work

• The Balance of Payment (BOP) measures the flow of money in and out of a country in a specified time period (usually a month, quarter, or year)
   
• The most important component of the BOP is the current account
• It represents the flow of trade (exports - imports) in goods and services
• It also includes net income payments (the difference between income flowing in and out of a country)
   

Components of the UK Current Account For 2017

Explaining the account

• Goods are also referred to as visible exports or imports
• Services are also referred to as invisible exports or imports
• Net income consists of income transfers by citizens and corporations
  • Credits are received from UK citizens who are abroad and send remittances home
  • Debits are sent by foreigners working in the UK back to their countries

• Current transfers are typically payments at government level between countries, e.g. contributions to the World Bank
• The Current Account balance is often expressed as a % of GDP
  • This allows for easy international comparisons

The Current Account balance

• A trade deficit is when a country's imports exceed its exports during a given time period. 
• A trade surplus is when a country's exports exceed its imports during a given time period. Balance of trade = exports - imports.
• The UK government has a macroeconomic aim to get their Current Account balance as close to equilibrium as possible
• The UK usually has a current account deficit in its balance of payments
  
  
• Export-led economic growth would help it become positive
• However, with increasing income and wealth in an economy, the value of imports rises
• Consumers enjoy the variety of goods and services abroad
• Rising imports push the balance towards a deficit