Three Pillars of Economic Analysis
Economic researchers use economic analysis to gauge the state of a country’s economy. There are many inputs economists use in their analysis of an economy. Three pillars of economic analysis are gross domestic product (GDP), personal income, and employment. Government agencies provide statistics relating to these aspects of the economy.
A nation’s gross domestic product is the broadest measure of its economic activity. GDP measures the total output of goods and services in an economy. This measure incorporates consumer spending, business investment, and government expenditure and transfer payments. In addition, it takes into account imports of goods and services into a country and exports from a country.
The measures of personal income economists use demonstrate changes in personal income within an economy, which provides a perspective on whether incomes are rising or declining. Research on personal income also examines whether consumer spending is rising or not, the direction of consumer savings levels, and the sources of income. For instance, you could earn income from your wages, from renting out property, or from other sources.
Economic analysis also uses input about the state of employment in an economy. A healthy economy can handle a certain level of unemployment. Economists voice concern when the level gets high. There is also a concern that very low unemployment can give rise to inflation. Economists study employment at the national, state, and local levels. Employment statistics tend to vary from location to location, depending on the health of local businesses.