Chapter 29: Measuring and Evaluating Macroeconomic Performance

David Hudgins

Measuring and evaluating macroeconomic performance The performance of a nation's economy actualizes as both cause and effect. The phase of the economic cycle serves as a catalyst that permeates the decisions of individuals, business firms, and government policy makers on a continuous basis. It affects the prices and yields of financial assets, the spending decisions of consumers, corporate borrowing and investment, and choices available to general public. Yet the course of economic activity is also the result of the expectations and actions of its participants. Their collective behavior works in conjunction with the state of nature, which may include favorable conditions or unfavorable conditions, such as excessive droughts, flooding, or other disasters, to guide the economy along its trajectory. Despite the importance of assessing economic performance, its measurement and evaluation are elusive. This is true for three main reasons. First, just as beauty is in the eye of the beholder, ...

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