Question

ex Question 2

Short essay(3/4 of a page)
What are the three key macroeconomic goals (real GDP, unemployment & inflation rate) that is of utmost concern to macroeconomists and why are they important. What can possibly happen to an economy if these variables are not closely monitored?

Answer 1

The three key aspects of microeconomic goals, the real GDP, unemployment and inflation rate are of utmost importance to The Economists when studying the economy as a whole.

1. Real GDP: It basically tells about the size of the economy and the overall performance of the economy that is it's size and health. For example it allows to measure the gross total market value of all us goods and services produced in a given year. These data are important to compare the performance of one economy with around the world. Generally an increase in real GDP is interpreted as assigned that economy is doing well.

If the real GDP is not monitored closely, the datas of the economy performance, its size and wealth will be vague and it would be hard to make correct decision in order to improvise the economic performance.

2. Unemployment: it is also a rate which is considered important for indicating the health of the economy and is also so the key indicator utilised by Federal Reserves for setting monetary policies. It also tells specifically the sectors are industries which are are losing or gaining jobs in a particular period by studying the unemployment statistics.

When unemployment is not closely monitored, the most important effect will be on Federal Reserves making wrong policies for resolving the unemployment issues, which will directly affect the health of the economy. On the other hand it will not give the correct image of the health of the economy while deciding for various policies other than Federal Reserve policies.

3. Inflation rate: inflation rate indicates the the price variation for diversify the set of products and services of the economy. It allows for a single value representation of the increase in price level of services or goods over a period of time. It is important to understand inflation rate to know the customer spendings, business investments, and Employment rates, tax policies and interest rates, and various other factors of the economy.

If inflation rate is not studied or monitored closely The Economist will not be able to know correct data about the customers spendings, business investments, tax policies, interest rates, employment rates, etc, which will in turn affect the decision making. The decisions made about the economy and their prices will not be accurate and it will have a negative effect on the performance of the economy.