Archive for IBMP 16845 Global Capital Market KEU 447

MAJOR ECONOMIC INDICATORS

Posted in Uncategorized with tags on February 10, 2009 by apriliawijayati

This paper addresses the major economic indicators of a country as well as the impact of it in the economic condition.

The 5 major economic indicators:
1. GDP (Gross Domestic Product)
2. international trade
3. financial flows
4. national savings
5. income distribution

GDP (Gross Domestic Product)

If you judge how a person is doing economically, you might first look at his or her income. A person with a high income can more easily fulfill life’s necessities and luxuries. It is no surprise that people with higher incomes enjoy higher standards of living.

The same logic applies to nation’s overall economy. When judging whether the economy is doing well or not. It is natural to look at the total income that everyone in the economy is earning. That is Gross Domestic Product (GDP). GDP is defined as the market value of all final goods and services produced within a country in a given period of time.

We can compute GDP for this economy in one of two ways: by adding up the total expenditure by households or by adding up the total income (wages, rent, and profit) pay by firms.

International trade

The benefits of international trade:
1. increased variety of goods
2. lower cost through economies of scale
3. increased competition
4. enhanced flow of ideas

The effects can be determined by comparing the domestic price without trade to the world price. A low domestic price indicates that the country has a comparative advantage in producing the good and the country will become an exporter. A high domestic price indicates that the rest of the world has a comparative advantage in producing the good and that the country will become an importer.

Financial flows

Financial flow is relevant to the development of an effective and appropriate international response to climate change, with particular focus on developing countries need, including their medium to long term requirements for investment and finance.

If the development is high, it is good for the country, because it reflects the productivity that will affect in high income and GDP.

National savings

National saving (saving) is defined as the total income in the economy that remains after paying for consumption and government purchases.

Private saving is the income that households have left after paying for taxes and consumption.
Public saving is the tax revenue that the government has left after paying for its spending.
National saving equals private saving plus public saving.

A government budget deficit represents negative public saving and reduces national saving and the supply of loanable funds available to finance investment. When a government budget deficit decreases investment, then, it will reduce the growth of productivity and GDP.

Income distribution

Income distribution is the distribution of wages earned across a company, industry, or country.

When the income distribution of a country spread through its people inside the country, it means that the poverty rate is low. It reflects that the economic condition of the country is good; because the productivity has spread all over the country and all the people have contributions to national income GDP.