When it comes to monitoring and evaluating the performance of an economy, there are some key indicators that any government would wish to have available. Perhaps most important would be the level of aggregate output being produced in the economy, as measured by GDP or GNI. These were discussed in this column in the September 2012 issue of ECONOMIC REVIEW (Vol. 30, No. 1). Other crucial indicators are inflation, unemployment and the balance of payments. In this Vital statistics column, I focus on inflation and unemployment, and the relationship between them.
It is important to be clear about what is meant by these two variables, and how we can measure them. Only if we have reliable and reasonably accurate measurements of these important variables can we monitor how the economy is performing.
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