STUDY UNIT 1 – INTRODUCTION
LEARNING OUTCOMES:
i. Have a general notion of what economic indicators are all about
ii. Know the main criteria for assessing the performance of the economy
iii. Be aware of some of the main source of economic data
iv. Be aware of some of the pitfalls in manipula...
LEARNING OUTCOMES:
i. Have a general notion of what economic indicators are all about
ii. Know the main criteria for assessing the performance of the economy
iii. Be aware of some of the main source of economic data
iv. Be aware of some of the pitfalls in manipulating and interpreting economic data
1.1. ECONOMIC INDICATORS
LO1: Have a general notion of what economic indicators are all about
Economic Indicator
It refers to a statistic (data) that shows the behaviour of an economic variable, usually
over time.
Some of the examples of economic indicators include:
o Real Gross Domestic Product (GDP)
o Employment
o Exchange Rates
o Money Supply
o Balance of Payment (BOP)
o Consumer Price Index (CPI)
o Producer Price Index (PPI)
Economic indicators are also the key statistics of the economy that reveal the direction
the economy is heading.
REASONS FOR MONITORING INDICATORS:
Asses general performance of the economy
Effectiveness of economic policy
Make economic forecasts
Compare economic policies between countries.
Speculators monitor to decide whether to buy or sell socks.
To expand business and explore new markets
, 1.2 ASSESSING CRITERIA FOR ASSESSING THE PERFORMANCE OF THE
ECONOMY
LO2: Know the main criteria for assessing the performance of the economy
MAIN CRITERIA FOR CRITERIA FOR ASSESSING THE PERFORMANCE OF THE
ECONOMY
a) Economic Growth
o How does one measure performance of the economy in relation to the growth target
o REAL GDP is used to measure the economic growth
o It refers to an inflation-adjusted measure that reflects the value of all goods and
services produced in a given year, express in base-year prices.
o Also known as GDP at constant price
b) Price Stability
o Inflation should be kept as low as possible
o Consumer Price Index used to measure inflation
o It is an index of the prices of a representative “basket” of consumer goods and
services
o In SA, the SARB uses consumer price index excluding mortgage costs (CPIX) to
measure inflation.
c) Full Employment
o How is the employment performance of the economy measured
o The aim of providing everyone who is willing to work at the current wage rate with a
job.
o Combating of unemployment
o Creating jobs and reducing unemployment level in a country
d) Balance of Payment (BOP) Stability
o A statement that summarizes an economy’s transactions with the rest of the world
for a specified time period.
e) Equitable distribution of income and wealth
o A fair share of the national 'cake' ie wealth, more equitable than would be in the
case of an entirely free market.
o How is income distributed amongst individuals or households?
1.3 SOURCES OF ECONOMIC DATA
LO3: Be aware of some of the main source of economic data
, SOME OF THE MAIN SOURCE OF ECONOMIC DATA
o Statistics South Africa
o SARB
o Newspapers and financial magazines
o World Bank data
o Quantec data
o IMF data
1.4 MANIPULATING AND INTERPRETING ECONOMIC DATA
LO4: Be aware of some of the pitfalls in manipulating and interpreting economic data
INTERPRETING ECONOMIC DATA
Interpreting data requires an understanding of the data, knowledge of which data to use
and an awareness of the limitations of the data.
Below are Some Basic hints when economic data is being interpreted:
o The definitions the indicators should always be checked carefully
o Determine the period to which the data relates.
o Always make sure data is seasonally adjusted.
o Ascertain the geographic coverage of the data.
o Check if the data has been adjusted for inflation.
o Check data source who produced the data, government or private company.
o Check whether the data will be revised or if still needs to be revised.
o For observations over time, it may be useful to plot the data on a graph.
o Determine what other yard sticks will aid interpretation.
o Bear in mind that correlation does not result in causation.
1.5 SOME BASIC CONCEPTS AND TECHNIQUES.
Real and Nominal Values
Nominal Value:
o Are calculated using prices of the current year (including inflation in prices)
o Also known as current value since they are constructed using prices that are current
o Nominal value = PQ
Real Values:
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