Question

Now that we have looked at measures of inflation and unemployment, in addition to GDP, pick a country and evaluate its' "economic health" relative to the United States. Is the country doing better or worse, and why?

Answer 1

Hi,

GDP growth rate, inflation and unemployment are useful indicators to evaluate the health on any economy. We can compare different economies based on these parameters.

Let us compare economies of USA and India on these parameters:

GDP growth rate - GDP measures the total production within the domestic territory. GDP growth rate for USA was 3% for 2018, whereas GDP growth rate for India was 6.8% for the same period. However, it is not correct to compare these two based on GDP growth numbers, as GDP of US is much bigger (almost ten times) than India and thus % growth will be lower than India due to base effect.

Unemployment rate - unemployment rate is around 3.6% in USA while it is 6.1% in India. Thus, USA is performing far better in terms of generating jobs for its population.

Inflation rate - Continuous rise in general price level is called inflation.Annual inflation rate in USA for 2018 was about 1.9%, the corresponding figure for India was 3.4%. Thus, USA has managed to contain inflation better.

From the above, we can safely say that US economy is doing much better. It is generating more job opportunities, producing more and consuming the goods at comparatively lower prices.