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Project 1 – Metrics for Assessing Macroeconomic Performance My objectives with assignment

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Project 1 – Metrics for Assessing Macroeconomic Performance My objectives with assignment
  Project 1 – Metrics for Assessing Macroeconomic PerformanceMy objectives with assignment • Having you   think about how to assess economic performance • Helping you to learn a bit about data sources • Giving you some practice at writing re! Writing an A Paper  "#hat $ was looking for in the assignment%o evaluate performance& you need to think about performance objectives' #hat doand(or should we e)pect in terms of macro performance* #e have formali+ed some of those' ,thers we have arrived at through e)perience- good and bad' $n any case& performance objectives represent a national value judgment' .onsider Humphrey/Hawkins& 0eds mission statement& public opinionpolls& etc"' %hese include! • 2obs& employment • Price stability • 3conomic growth • $nternational whatever • ,thers possibly financial sector stability& budget(debt parameters& income and(or wealth e4uality(e4uity issues& etc"0or each of these objectives(areas& how do we measure performance* #hat are theappropriate measuring sticks* #ith Project 1 you are asked to identify certainmetrics appropriate for the task of evaluating macroeconomic performance' $n thepresent conte)t a metric is a 4uantifiable measure that can be used to track andassess the status of a specific performance area or target' 0or e)ample& whatspecifically do we look at to measure how well we are doing in the jobs(employmentarea* How do we measure whether we have achieved price stability* #hat statisticor statistics do we use to measure economic growth*5eep in mind with this assignment that a metric is a measuring stick' %hus it needsto be 4uantifiable and it should e)hibit some identifiable relationship to some aspectof macroeconomic performance' 0or e)ample& while it is by no means a perfectmeasure of the economys performance in the area of  jobs(employment(unemployment& the civilian unemployment rate as calculated andreleased by the 6abor 7epartments 869 each month" at least tells us somethingabout how the economy is doing in that area& and as the rate goes up or down& that  usually ideally or hopefully" indicates something about changes in performance inthat area' ,n the other hand& :monetary policy; is not a metric' #hy* $s there astatistic that we call monetary policy* ,r do we need a measuring stick to describe&4uantify or capture monetary policy* Monetary policy is a tool that is used to affectmacroeconomic performance& but it is not a measuring stick for economicperformance' 9imilarly& :inflation; and :price stability; are not metrics' $n fact& we need a metricto measure whether we have price stability& or how much inflation we are having'Also& :interest rates; probably does not 4ualify as a metric' #hy* 8ecause thereare literally thousands of different rates of interest being charged(paid in theeconomy at any point of time' 0or e)ample& the rate that banks charge one anotheron overnight loans is 4uite different from the rate that the local payday loancompany charges you or me to borrow <=>> to :tide us over; to the ne)t payday'9o& which specific rate of interest or group of rates do you mean* 0urther& whatdoes that specific rate or group of rates tell you about the performance of themacroeconomy* %hese are re4uirements for something to serve as a useful metric' Additional Points! ,ften we end up having to measure at something' 9o& we look for the best :pro)y; that we can find that will shed light on whatever it is we arehoping to assess' Also& when you are limited in terms of the number of metrics youcan use& think in terms of marginal benefit and tradeoffs' 0or e)ample& we havealready established that no one variable will fully tell the story allow us to assess"the :jobs; or :employment; performance of the economy' 9o& should we use five:jobs; metrics* $f so& that leaves only one metric to use to assess everything else' $f you use the .P$ or core .P$" to assess the :price stability; performance of theeconomy& how much additional assessing power do you get by adding the PP$ asanother metric* And is it worth giving up a metric that might be used to assesssome other area* $n other words& %H$9 $9 A %H,?GH% A@7 2?7GM3@%33B.$93'
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