Role of Economic Indicators in Daily Life

Global indicators are the tools which is used to evaluate the overall situation of an economy. It is a statistical information about the economic activity which helps an investor to identify the current scenario of the economy and in estimation of future decision. It allows to analyze the general trends in an economy. Mainly there are 3 kinds of economic indicators.

• Leading indicators

• Lagging indicators

• Coincident indicators

Leading indicators is considered as the short term predictor of an economy since it may vary before the overall economy moves before a change. Lagging indicators are those one which will change after the overall economy made a change and the coincident indicator will vary usually at the same time when the economy face a change.

Gross Domestic Product (GDP)

GDP is the most commonly used indicator which shows the value of total output occurred in an economy at a particular time period. The main components of GDP are personal consumption, investment, government expenditure and net export.

Poor GDP indicate the great reduction in production of goods and services which will cause heavy unemployment rate, it will affect the potential earning people. A quick slowdown in GDP will became a reason for recession because of the low revenue and decrease in customer purchasing power. It has an impact also on currency value. Similarly the higher GDP results in a healthy economy.

Gross National Product (GNP)

It is a wider measure which ascertain total economic activity of a nation. It is the total production of goods and services produced by a county. It helps to evaluate a country’s economic growth and stability. GNP is quantified by adding GDP with Net factor income. Actually through evaluating GNP, calculating the monetary flow, effort and expense.

Consumer Price Index (CPI)

It is one of the statistical analysis of average price changes for a product. The price level changes can be of a single item of a number of products. Usually it helps to identify inflation. CPI provides an idea regarding the price level changes in an economy over a given period. So it allows a common man in getting a clear picture about the cost of living during a specific period of time.

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Prepared by

Veena Vinod

Faculty

Kairos Institute, Thodupuzha