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Economic Merit

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Economic merit refers to the rise in gross domestic product per capita or other indicators of aggregate income. Economic merit is categorized as either negative or positive. This further helps economist to know whether the economy is shrinking or improving.

There are three main methods to measure economic merit, they are: Unemployment levels, Economic growth (GDP) and Balance of payment.

Unemployment happens when people who are ready and able to work have no work at the present time. The pervasiveness of unemployment is normally calculated using unemployment rate. When unemployment levels are low the economy is said to be having positive economic merit and vice versa.

Economic Growth in terms of GDP is another measure of economic merit. This method is the most common. In this method, economists compute a country's total official trade and industry output. They consider the market cost of services and goods, produced in one year, regardless of the manufacturer’s nationality. It considers only goods and services made within the geographic boundaries of a country. Increase in GDP is positively correlated to the degree of economic merit as well as the living standards in a country.

The balance of payments is used to measure economic merit by examining all financial transactions that happen internationally within a particular time period. It’s normally computed every year. All transactions done by public and private enterprises are combined in the balance of payment accounts so as to calculate outflow and inflow of money.

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