Courses : Intermediate Macroeconomics Lecturer : Frischa Adellia Semester : 4th Semester, 2022/2023 Sesion Measurement of Economic Growth Measurement of economic growth is a way to measure changes in economic value over time. Economic indicators commonly used to measure economic growth are Gross Domestic Product (GDP) and Gross National Product (GNP). GDP measures the value of all goods and services produced within the geographical boundaries of a country in a certain period, while GNP measures the value of all goods and services produced by citizens of a country, both inside and outside the country, in a certain period. Apart from GDP and GNP, there are also several other economic indicators that can be used to measure economic growth, such as the unemployment rate, inflation rate, interest rate and currency exchange rate. Measuring good economic growth must consider the quality of production and distribution of income across all levels of society. Therefore, measurement of economic growth must also take into account qualitative indicators such as poverty levels, social welfare, health, and education. However, the measurement of economic growth cannot be the only benchmark for measuring a country's progress. Economic growth that is too fast without regard to the environment and social welfare can cause negative impacts on society and the environment. Therefore, measurement of economic growth must be considered carefully and accompanied by an assessment of social and environmental impacts. Measurement of economic growth can be done in several ways, namely: 1. Gross Domestic Product (GDP) GDP is one of the most common ways of measuring economic growth. GDP measures the market value of all goods and services produced within a country during one year. GDP can be measured in nominal terms (not taking into account inflation) or in real terms (taking into account inflation). 2. Gross National Income (GNP) GNP is the market value of all goods and services produced by residents of a country, both domestically and abroad, during one year. GNP can be measured in nominal or real terms. 3. Gross Domestic Product (GDP) GDP measures the market value of all goods and services produced within a country, regardless of income received by citizens from abroad or income of citizens abroad. 4. Consumer Price Index (CPI) The CPI measures the change in price of a group of goods and services consumed by households. CPI is used to measure inflation, which can affect economic growth. 5. Producer Price Index (IHP) PPI measures changes in the price of goods produced by producers in a country. PPI is used to measure cost pressures that can affect company profitability and economic growth. 6. Consumer and Business Confidence Index The consumer and business confidence index measures consumer and business confidence in current and future economic conditions. This index can provide clues about the future performance of the economy. 7. Employment Index The employment index measures the unemployment rate and available jobs. This index can provide an overview of labor market performance and economic growth. 8. Trading Index The trade index measures the volume of trade between countries or regions involved in trade. This index can provide an overview of trade performance and economic growth. There are several ways to measure economic growth, including: 1. Gross Domestic Product (GDP) GDP is the value of all final goods and services produced in a country in one year. GDP is used as a measure of economic growth because it includes all sectors and economic activities that occur in a country. GDP can be calculated both in nominal and real terms, taking inflation into account. 2. Gross National Income (GNP) GNP is a measure of all income received by residents of a country in one year, including income generated by citizens working abroad. GNP can also be calculated both in nominal and real terms. 3. Consumer Price Index (CPI) The CPI measures changes in the prices of goods and services consumed by households. CPI is used as a measure of inflation, and can provide an overview of a country's economic condition. 4. Unemployment rate The unemployment rate reflects the number of people who are not working but looking for work within a country. The lower the unemployment rate, the higher the probability of strong economic growth. 5. Investment Investment reflects the amount of capital invested in a country in order to increase production capacity and productivity. The higher the investment, the higher the probability of strong economic growth. 6. Export and import Exports and imports reflect the amount of goods and services traded by a country with other countries. The higher the exports and imports, the greater the possibility of strong economic growth. 7. Consumer and Business Confidence Index The consumer and business confidence indices reflect the beliefs of consumers and businesses about current and future economic conditions. The higher the consumer and business confidence index, the more likely strong economic growth is. Each of these measures has advantages and disadvantages in measuring economic growth, so they should be considered together to get a more complete and accurate picture of a country's economic condition. One of the weaknesses of GDP as a measure of economic growth is that GDP does not take into account qualitative factors such as people's welfare, environmental quality, and income distribution. For example, increasing GDP does not necessarily mean increasing overall societal well-being, because income can be distributed unequally and there can be severe environmental problems behind rapid economic growth. Therefore, there have been attempts to develop alternative, more holistic metrics, such as the Human Development Index (IPM) used by the United Nations. The HDI takes into account factors such as health, education and poverty, and takes into account environmental and social aspects.