Key Performance Indicators
- Economic Growth
- Short run – When an economy increases its output (real GDP)
- This is unsustainable as the productive potential must increase too, for if it doesn’t, the economy will reach supply constraints (slope of AS curve)
- Long run – an increase in the maximum output that the economy can produce
- Short run – When an economy increases its output (real GDP)
- Unemployment
- When a country’s output increases, unemployment usually falls
- Unemployment is said to exit when people who are willing and able to work are without jobs
- Not everyone is counted, e.g. a 14 year old or a pensioner would be economically inactive, and not a part of the labour force
- Inflation
- This is a sustained rise in the price level
- Balance of Payments
- This is a record of a country’s economic transactions with the rest of the world, e.g. what a country’s buying and selling, and who they’re trading with.
- Income Distribution
- Economic Stability
- A government is likely to try and prevent severe fluctuations in indicators such as output, employment and inflation.
- Such fluctuations create uncertainty, and make it difficult for households and firms to plan ahead.
- In turn, this can discourage workers from increasing their skills and firms from investing
- Therefore, reducing economic fluctuations should increase an economy’s long term growth potential.