Measuring Economic Health

Measuring Economic Health

Amanda Kelley

ECO/212

April 11, 2011

University of Phoenix Online

Measuring Economic Health

MEMO

To: Susan Harrell, CEO

From: Amanda Kelley, Staff Accountant

Date: April 11, 2011

Re: Measuring Economic Health

Message

To understand the health of the economy the Gross Domestic Product (GDP) must be understood first. A business cycle will describe the changes in the demand side of the economy, and this is measured by the GDP. Our government has certain bodies that determine national fiscal policies. These fiscal policies are important in determining the measure of the business cycle. These policies and roles are important to understand fiscal policies along with how the changes that the governmental bodies make impact the economy either positively or negatively.

The GDP is defined as being a macroeconomic measure of the size of an economy that is adjusted for price changes and inflation. The GDP is thought to be the best measure of economic well being so it is the most closely watched economic statistic. The GDP evaluates our economic process by looking at household incomes and how much of that income is spent. It also mergers the output of goods and services within the economy. Four separate areas of the economy are measured by the GDP. These areas are investment, government purchases, and net exports. The GDP is important to the economic business cycle.

Other changes that will affect the business cycle are measured by production of goods or services and/or the number of people that are employed. Business cycles are directly related to the GDP. They are related by measuring variables of the total income of all goods and services that are produced and purchased within the economy. If investments are increased by the governmental bodies, inflation will be altered which in turn changes the GDP as well as the business cycle.

The governmental bodies choose the government purchases and the taxes for the fiscal policies. When...