Key Economic Indicators: CPI, GDP, IPSA, IMACEC, UF

Key Economic Indicators

Introduction

Economic indicators help us understand the national economic situation. But who studies these indexes?

• Microeconomics: The study of how households and firms make decisions and interact in the market.
• Macroeconomics: The study of phenomena that affect the whole economy.

Consumer Price Index (CPI)

The CPI is an indicator of the cost of goods and services purchased by a typical consumer.

How is the CPI Calculated?

1. The basket is set.
2. Prices are found, and the value of the basket is calculated.
3. A base year is chosen, and the index is calculated.
4. The inflation rate is estimated.

Dollar

The dollar is the most widely used foreign currency in Chile and is responsible for various transactions, mainly abroad.

Gross Domestic Product (GDP)

GDP is considered the best indicator of welfare in society.

Definition: The market value of all final goods and services produced within a country during a certain period.

Real Economy

The real economy is, of course, more complicated than the flow shows. Households do not spend all their income; they pay a part to the state and save for the future. Moreover, households do not buy all the goods and services.

IPSA (Selective Stock Price Index)

The IPSA is the main stock index (pertaining to the operations of the stock market) of Chile.

Unemployment and Labor Force

One of the main concerns of people and economic authorities is unemployment, a variable whose name alone causes concern.

The Unidad de Fomento (UF)

This measure is adjustable based on the movement of the Consumer Price Index.

IMACEC (Monthly Economic Activity Indicator)

The IMACEC measures the economic growth of Chile.

The Measurement of Economic Processes

The economy of each country needs to know the degree of growth and development it is achieving. To that end, there are a number of indicators to measure the economic process. Among these indicators, we can mention the following:

a) Gross Domestic Product (GDP)

The value of all final goods produced by the economy in the span of one year with resources within the country. This value is measured in money. What defines the concept of GDP is the fact that it measures the value of final goods produced within the borders of the country.

b) Gross National Product (GNP)

The value of all final goods produced by the economy of a country within its borders, less income sent abroad, plus income from abroad, within a year. GNP shows the production delivered by residents in the country. Like GDP, it is measured in money.

c) Net National Product (NNP)

NNP is equal to GNP less reinvestment. Reinvestment means the replacement of capital goods that have been worn out in the production of the year for the replacement of capital goods that have become obsolete.

d) National Income (NI)

National Income is the money income received in the period of one year for all sectors involved in production within the country, plus income from abroad, less income sent abroad. The NI is equivalent to the sum of all payments to productive factors that were used during the year, i.e., the sum of all wages, all benefits and profits of capital, interest, rents, etc.

e) Per Capita Output

Per capita output is the national product divided by the number of inhabitants. This indicator allows us to assess whether the economy has had real growth in a given period. The condition for output per capita to grow is that the GNP should increase faster than population growth.

f) Per Capita Income

Per capita income is the national income divided by the number of inhabitants.

g) Rate of Development

The rate of development is a concept that measures the rate of growth of a country's economy. It is calculated by comparing the annual percentage rate experienced by the GNP per capita.