Question

Why are GDP, CPI and the Unemployment statistics captured by the government? Name one limitation associated with the measurement of each of these statistics.

Answer 1

GDP ( Gross Domestic Product ) is the total value of goods and services produced in a geographic region such as a country, or a state, measured in monetary terms. It helps to know the increase or decrease in economic growth of a country, a state, or a region. If GDP of a country is consistently rising, the country becomes more prosperous than before, standards of living improve, whereas when GDP decreases the country becomes poorer.

It is a yardstick to know the real economic progress of a nation, state, or a region.

One limitation is that it doesn't really indicate standard of living, nor does it measure the informal or black market economy

CPI ( Consumer Price Index ) is the measure of average change in price of a basket of goods and services for consumers. It helps to know the change in price level of goods and services which in turn enables analysis of inflation data in a country, state or a region. If the CPI is continuously rising, the country is said to be going through inflation, and a persistent fall in CPI is known as deflation.

Persistent inflation eats into the savings of the people, especially poor. Therefore, it is imperative on the part of the government to have a stable price regime.

One limitation is that it doesn't count the quality of the goods or its substitutes.

Unemployment rate in a country tells in percentage terms how many people in the labor workforce who are eligible, and willing to work, do not find a work opportunity to earn income.

It helps to know whether people in a country have enough job opportunities. It shows the success or failure of government policy towards industrialization and job creation.

The government may use manipulative data to show higher or lower employment rate.