Catalog / Economic Indicators Cheat Sheet
Economic Indicators Cheat Sheet
A quick reference guide to key economic indicators used to assess the health and performance of an economy.
Key Economic Indicators
Gross Domestic Product (GDP)
Definition: The total value of goods and services produced within a country’s borders during a specific time period (usually a quarter or a year). Importance: Primary indicator of economic size and growth. Used to compare the performance of different economies. |
Types:
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Calculation Methods:
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Limitations: Does not account for non-market activities (e.g., household work), environmental degradation, or income inequality. |
Inflation Rate
Definition: The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. |
Measurement: Typically measured using the Consumer Price Index (CPI) or the Producer Price Index (PPI). |
Consumer Price Index (CPI): Measures the average change over time in the prices paid by urban consumers for a basket of consumer goods and services. |
Producer Price Index (PPI): Measures the average change over time in the selling prices received by domestic producers for their output. |
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Unemployment Rate
Definition: The percentage of the labor force that is unemployed but actively seeking employment. |
Calculation: (Number of Unemployed / Labor Force) * 100
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Types:
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Limitations: Doesn’t include discouraged workers (those who have stopped looking for work) or underemployed workers (those working part-time but wanting full-time employment). |
Fiscal and Monetary Indicators
Government Debt
Definition: The total amount of money owed by a government to its creditors. |
Measurement: Usually expressed as a percentage of GDP. Provides an indication of a country’s ability to repay its debt. |
Impact: High levels of government debt can lead to higher interest rates, reduced government spending on essential services, and potential economic instability. |
Budget Deficit/Surplus
Definition:
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Impact: Budget deficits can lead to increased government debt, while budget surpluses can be used to reduce debt or fund public programs. |
Interest Rates
Definition: The cost of borrowing money, usually expressed as an annual percentage rate. |
Central Bank Influence: Central banks (e.g., the Federal Reserve in the US) use interest rates as a tool to control inflation and stimulate economic growth. |
Impact:
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Types
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External Sector Indicators
Balance of Trade
Definition: The difference between a country’s exports and imports of goods and services. |
Trade Surplus: Exports exceed imports. |
Impact: Trade surpluses can boost economic growth, while trade deficits can reduce it. |
Exchange Rates
Definition: The value of one currency in terms of another. |
Appreciation: A currency becomes more valuable relative to another currency. |
Impact: Exchange rates affect the price of exports and imports, influencing a country’s trade balance. |
Foreign Direct Investment (FDI)
Definition: Investments made by a company or individual in one country into business interests located in another country. |
Impact: FDI can bring new technology, jobs, and capital into a country, boosting economic growth. |
Other Important Indicators
Consumer Confidence Index (CCI)
Definition: A measure of consumers’ optimism or pessimism regarding the state of the economy and their personal financial situations. |
Impact: High consumer confidence tends to lead to increased spending, while low consumer confidence tends to lead to decreased spending. |
Purchasing Managers' Index (PMI)
Definition: A measure of the prevailing direction of economic trends in the manufacturing and service sectors. |
Interpretation: A PMI above 50 indicates an expansion of the sector, while a PMI below 50 indicates a contraction. |
Housing Market Indicators
Examples: New home sales, existing home sales, housing prices, and mortgage rates. |
Impact: The housing market is a leading indicator of economic activity. A strong housing market tends to indicate a healthy economy, while a weak housing market tends to indicate a struggling economy. |