Question

1.2 Identify and define the macroeconomic variables that can be used to measure whether the strategy was successful or not. for 30 marks 30 points

Answer 1

The key macroeconomic variables to determine whether the strategy was successful or not are discussed as below:

-- Inflation Rate: Inflation refers to the rise in the general level of prices over time. The inflation rate measures the percentage growth rate of CPI from one year to the next. When Inflation occurs in an economy the purchasing power of money decreases which is not good and indicates that the strategy was not successful

--Unemployment rate: Unemployment is defined as the number of people within an economy who are willing to work, however do not have a job. It determines the health of the economy. It is computed as dividing the number of unemployed people with number of people in the labor force. High rates of unemployment indicates that the strategy was unsuccessful, however the extremely low rates of unemployment may signal that strategy was successful

-- Economic Output: Economic output is defined as quantity of goods or services produced in a given time frame by a nation. A higher rate of the economic output means that the people within an economy are getting richer which is a good sign for the strategy

-- Interest Rate: Interest rate is defined as the cost of borrowing money. An increasing interest rates indicates an expanding economy, but when high interest rates begin to increase faster and further, that is a sure sign of inflation