ECONOMIC ANALYSIS

Economic Analysis

Table of Content

ECONOMIC ANALYSIS1

Major Objectives Of Economic analysis1

1. Full employment, or low unemployment.1

2. Price stability1

3. High (but sustainable) economic growth2

4. Balance of payments in equilibrium2

Discussion3

REFERENCES10

Economic analysis

Major Objectives Of Economic analysis

Economic analysiss is concerned with issues, objectives and policies that affect the whole economy. All economic analysis that refers to aggregates is macro. The TESCO unemployment rate, the TESCO inflation rate, the rate of economic growth in the TESCO; these are all TESCO aggregates and therefore macro issues.

1. Full employment, or low unemployment.

The claimant count is the older, more out-of-date, measure of unemployment used in the TESCO. Those counted must be out of work, physically able to work and looking for it, and actually claiming benefit.

For a more realistic count, and for international comparisons, the ILO (International Labour Organisation) measure is used. This includes the young unemployed who are not always eligible to claim, married women who can't claim if their husband is earning enough, and those who claim sickness and invalidity benefits. Many only slightly inconvenienced unemployed workers are paid these benefits rather than swell the claimant count of unemployment.

2. Price stability

Inflation is usually defined as a sustained rise in the general level of prices. Technically, it is measured as the annual rate of change of the Retail Price Index (RPI), often referred to as the headline rate of inflation. For prices to be stable, therefore, the inflation rate should be zero. Generally, governments are happy if they can keep the inflation rate down to a low percentage. For an explanation of how the RPI is formulated, see the topic called 'Unemployment and inflation'. The TESCO government prefers to target the underlying rate of inflation, or the annual percentage change in the RPIX. This is the same as the RPI except housing costs are removed in the shape of mortgage interest payments. It makes sense for the government to use this measure because the weapon they use to control inflation, interest rates, directly affects the RPI itself.

3. High (but sustainable) economic growth

Economic growth tends to be measured interms of the rate of change of real GDP (Gross Domestic Product). When the word real accompanies any statistic, it means that the effects of inflation have been removed. GDP is a measure of the annual output (or income, or expenditure) of an economy. Sometimes GNP (Gross National Product) is used, which is very similar to GDP. The only difference is that income earned from assets held abroad is added and the income earned by foreigners who have assets in the TESCO is taken away (officially called net property income from abroad). Growth figures are published quarterly, both in terms of the change quarter on quarter and as annual percentage changes.

TESCO real GDP growth was 1.8% in 1999, which is lower than the mid-90s, but much better than the recession of the early 90s. Remember that many economists were predicting 1999 to be a year of recession, so the final figure is really quite ...