Economic Performance

Economic performance: 

Economic performance Indicators…….

Economic Performance: 

Economic Performance An action of carrying out any economic activity, can be either good or bad. Indicates how a country is performing economically. Can be estimated with the actions/activities related to nation’s production, consumption, savings, and investments. Major indicators: GDP, GNP, NNP, NI, PI, DPI.

Performance Indicator – 1 What is GDP?: 

Performance Indicator – 1 What is GDP? Gross Domestic Product (GDP) Definition: the market value of all final goods produced within a country in a given period of time. It is one of the measures of the size of the economy. It is an indicator of economic growth and performance of a country. It can measure spending on all goods and services OR it can also measure all income earned.

Who calculates GDP ?: 

Who calculates GDP ? Measured by any national statistical agency of any country. For example: United States: Bureau of Economic Analysis. India: Ministry of Statistics and Program Implementation Republic of Korea: Ministry of Statistics and Finance

How to calculate GDP ?: 

How to calculate GDP ? Multiply the quantity of each good by its price and then add the results. It is not possible to record every single good and service produced during the year, so government statisticians instead use scientific sampling techniques to estimate the quanitities and prices of the individual products. EXCLUSIONS Intermediate products. Secondhand sales. Nonmarket transactions. Underground economy.

Estimating GDP: 

Estimating GDP Product Quantity (millions) Price (per 1 unit) Dollar Value (millions) Goods Automobiles Replacement-tires Shoes 6 10 55 $25,000 $60 $50 ? ? ? Services Haircuts Income tax-filings Legal advice 150 30 45 $8 $150 $200 ? ? ? Structures Single family Multifamily Commercials 3 5 1 $175,600 $300,000 $1,000,000 ? ? ? Total GDP = ??

Performance Indicator – 1 GDP per capita: 

Performance Indicator – 1 GDP per capita A measure of the total output of a country that takes the gross domestic product (GDP) and divides it by the number of people in the country. Useful for country comparison ---- shows the relative performance of the countries. A rise in per capita GDP signals growth in the economy and tends to translate as an increase in productivity.

Limitations of GDP: 

Limitations of GDP Indicates nothing about the composition of output. Ex. v alue of outputs like: space research, education, medical facilities, missile technology, housing etc. W hich one? Indicates a little about impact of production on the quality of life ( QoL ). Ex. construction of houses, sewage, wildlife, environment degradation? GDP can be created/controlled by certain activities. Ex. China’s housing industry?

Limitations of GDP BUT still useful…….: 

Limitations of GDP BUT still useful……. How? Check textbook: page 323 Clayton , G. E. (2009). Economics, principles and practices . New York: Glencoe/McGraw-Hill School Pub Co . Also, check webpage for Importance of GDP

Indicator of Performance – 2 Gross National Product (GNP): 

Indicator of Performance – 2 Gross National Product (GNP) A good indicator of performance. At one side it represents output. On the other side it represents an equal amount of income. It has several subcategories: - Net National Product (NNP) - National Income (NI) - Personal Income (PI) - Disposable Personal Income (DPI)