When describing the state of the U.S. economy, reporters often refer to the nation’s GDP, its unemployment rate, and the CPI. Explain what each of these terms means and why each measure is significant.
The state of any economy is assessed with the help of some financial and economic indicators. With these indicators, a calculated estimation of the growth or recession of the economy can made. Without credible information about these indicators, any conclusion or assessment would be not worthy of consideration. To describe the state of the US economy, reporter often refer to some of these indicators which include GDP. Unemployment rate and CPI. I would explain each of them one by one in the following discussion.
GDP or Gross Domestic Product
GDP refers to the total value of goods and services of a nation in a specific fiscal year. In other words GDP tells us about the annual performance of a country’s economy in financial terms. An increase in GDP is usually referred to as the growth of an economy. This is what reporters may also refer to as an improving economy. Having said that, there are also times when the GDP is growing but the overall economy might be going down (Cobb, Halstead & Rowe, 1995). Therefore, the reporter do not rely only on GDP but also use more indicators.
Unemployment rate is the number of people who are unemployed and over 16 years of age out of 100. The unemployment rate increase indicate the recession of an economy as this means that there are not enough public and private job opportunities for an increased number of people. This also indicate that the economy may be in bad shape. Unemployment may also mean that the purchasing capacity of different families would decrease resulting in overall decrease in national spending.
CPI or Consumer Price Index
This is a monthly measure. This measure is used to estimate an increase or decrease in inflation in a country. The measure is calculated from the price of different services and goods by noticing their price increase or decrease. CPI helps in measuring if the salaries of the citizens are enough to coup with the price inflation increase or not.