The organization's CEO is focused on the concern of the fact that members of the strategic planning committee are not accustomed with current economic thoughts and principles With this in mind the introduction of the principles and thoughts are a necessity in order for the strategic planning committee to familiarize themselves with it It seems that economists are both scientists and policymakers because they believe in the principles of society used to allocate scarce resources how the economy coordinates society's independent economic product GDP and how it is defined and calculated and how the consumer price index CPI is constructed any it is an imperfect measurement of the cost of living Respectfully economists have similar traits with scientists This is due to the fact that they must be able to hypothesis and develop models that can be tested by using variable data These models and the tests that need to be done in order to get results can give predictions At times the data can vary with incorrect or inaccurate results just like any test results With the data collected economists are able to review and determine the objective analysis This is used to determine what has been happening in the economy and used as the future statements about the economy People use the tradeoffs among alternatives the foregone opportunities as well as their rationale and incentives they face to allocate the scarce resources depending with the abilities desires and efforts of the members The circular flow model describes how resources goods money and services flow through an economy Within the process of flow through the economy this shows that the income and spending has connections between different parts of the economy Based on the model there seems to be two important players which are the Goods Services Markets and Factor Market
The Factor Markets are the companies that produce the goods and services in the economy while the Goods Services are allocated to the to the major consumers The major exchanges represented as flows of money goods and services are between these two economic firms Economists use this circular flow model to highlight the connection between households producers known as businesses and the government According to Macroeconomics Mankiw 2015 pg 196 197 the way the economy coordinates society's independent economic actors is by using a method called Gross Domestic Product Gross Domestic Product or GDP is the market value of all final goods and services produced within a country in a given period of time Mankiw 2015 pg 199 Its job is to determine how well an economy is doing by looking at the total income that everyone in the economy is making Mankiw 2015 pg 196 To do this GDP measures the total income for everyone in the economy and the total expenditure of the economy's output of goods and services It can range from food land cars and clothing
It is commonly used as a basis for the condition of health of national as well as global economies It is a measure of the income and expenditures of an economy When the GDP Is growing workers and business are doing well GDP is calculated for a specific period of time usually during a year or quarters Within an economy GDP Is the monetary value of all final goods and services produced The market values of a variety of goods and services must be calculated to determine the GDP A consumer price index CPI measures changes in the price level of a market basket of consumer goods and services purchased by the average typical consumer This is a more direct measurement of per capita GDP of standard of living in a country Its basis on the overall cost of the fixed basket of goods and services purchased By including a broad range of thousands of goods and services with the fixed basket the CPI can obtain a more accurate estimate of the cost of living Consumer price index is fixed and when the market changes like introduction of new goods CPI does not account for that Even in change in quality of things because nothing stays the same However consumer price index does not reflect change in quality Also the CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically
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