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Not only is it difficult to specify a definitive set of economic indicators, but it is often difficult to understand the systematic relationship of one variable to another. However, by reducing the economic environment to its fundamental components, it is possible to begin to determine (i) how they shape the market and (ii) how they subsequently interact with one another. Key elements in economic environment include income, purchasing power, market size, market type, and economic freedom.
ECONOMIC
Gross national income (GNI) measures the income generated both by total domestic production plus the international production activities of national firms, i.e., it is the market value of all final goods and services newly produced by a countrys domestically-owned firms plus the net flows of factor income (i.e., rents, profits, and labor income) in a given
year.
ECONOMIC
Gross Domestic Product. Gross domestic product (GDP) measures the value of production generated by both domestic and foreign-owned firms within a nations borders in a given year. Improving the Power of GNI. Managers improve the usefulness of GNI by adjusting it for the population of a country, its growth rate, economic sustainability, and the local cost of living.
Degree of Human Development. The Human Development Index (HDI) measures longevity, knowledge (primarily the adult literacy rate), and standard of living and is designed to capture long-term progress rather than short-term changes. (Note: the UN also reports a development index that adjusts for gender-related inequalities, gender empowerment, and poverty.)
FEATURES OF AN ECONOMY Inflation Unemployment Debt Income Distribution Poverty Labor Costs Productivity
FEATURES OF AN ECONOMY
The Balance of Payments : The balance of payments
(BOP), officially known as the Statement of Inter- national Transactions, records a countrys international transactions among companies, governments, and/or individuals. It reports the total of all money flowing into a country less all money flowing out of that country to any other country during a given period.
Current and Capital Accounts. The two primary accounts are: (a) the current account, which tracks all trade activity in merchandise and services, and (b) the capital account, which tracks both loans given to foreigners and loans received by citizens.
FEATURES OF AN ECONOMY Also included in the current account are income and compensation receipts and payments as well as unilateral transfers, which reflect both government and private relief grants and income transferred abroad. Whereas a trade surplus indicates that the value of exports exceeds the value of imports, a trade deficit indicates that the value of imports exceeds the value of exports. The statistical discrepancy reflects the difference between the sums of the credits and debits.
FEATURES OF AN ECONOMY
BOP and Economic Stability. Managers use the BOP to assess a country's economic stability. By measuring a country's transactions with the rest of the world, the BOP estimates a country's financial stability. BOP and Company Strategy. Monitoring trends in BOP gives managers more date in order to chart strategic choices.