Factors Used to Measure the Economy Essay Example | Topics and Well Written Essays - 500 words

Factors Used to Measure the Economy - Essay Example The essay "Factors Used to Measure the Economy" talks about such economic factors as the GDP, employment levels, inflation levels and the interest rates and tries to identify which of them is the best for this purpose. The GDP of a country is taken to be the value of all goods and services that are provided within the economic system. It can also be the total value which is added to a product at every stage of production whether the final product is a good or a service. It is measured on a period to period basis, therefore, it allows for easy comparisons to show how the economy has grown or shrunk over time. If the GDP of the United States grows from 10 trillion dollars to 11 trillion dollars in real terms over a one year period then it can be said that the American economy itself has grown by a trillion dollars in one year. Inflation level and interest rates are often connected with each other since both of them are dealing with the level of money which is being supplied to the economy. They are also popular in the media since they connect deeply with people’s abilities to borrow money and their money purchasing more goods and services (inflation). Interest rates refer to the cost of borrowing money which can be controlled by the government to slow down the economy if it appears to be overhearing or to increase economic output if the economy seems to be slowing down. Increasing inflation often means that prices are rising and unless wages keep up with rising prices, the standard of life for individuals is bound to go down.