The Big Three: Inflation, GDP, and Unemployment

Abstract

This note gives descriptive statistics of inflation, GDP (growth), and unemployment. How the statistics are calculated is discussed and issues specific to the 'Big Three' are mentioned. The note is part of the refresher course in Economics at Darden for incoming MBA students Excerpt UVA-G-0598 The Big Three: Inflation, GDP, and unemployment Inflation, gross domestic product (GDP) growth, and unemployment are three indicators that are carefully monitored by consumers, firms, and policy-makers worldwide. Hundreds of people are involved in gathering that data. They are the scorecard of an economy and give a sense of its overall health. In this note, key issues that relate to the “big three” are discussed. Inflation Inflation, the money supply, and central bank independence Inflation captures the change in the overall price level. For central banks around the world, inflation is a key indicator. Central banks are typically in charge of controlling inflation. To do so, they use monetary policy. To keep inflation in check, central banks try to control the money supply. Figure 1 suggests that they have good reason to focus on the money supply. Indeed, there is a strong positive correlation between the percentage changes in the money supply and the percentage changes in the price level. . . .