Measuring Economic Performance
Gross Domestic Product is a measure of economic performance that involves quantifying the value of final goods and services that are legitimately produced in a country. For the inclusion of goods and services in GDP numbers, they must be sold to final consumers. For example, crude oil sold to a refinery is not included, but petrol is included in GDP figures. In measuring economic performance, two approaches to GDP are used. The first one is the expenditure approach, which includes total spending on goods and services in a year. The second one is resource cost-income approach, which includes the sum of all the payments to suppliers of resources and other inputs used in producing goods and services during the year under the review (Sexton, 2012).
Another measure of economic performance is the employment level, which involves the determination of the number of people of working age who do are unemployed but are actively seeking for work. Possible effects of unemployment on economic performance include low tax revenues, increased payment due to benefits, the decline in social welfare that leads to social costs, such as crime and family breakdowns, and the opportunity cost of foregone potential output that would have been realized if all the people were employed (Sexton, 2012).
Inflation rate means a continuous rise in prices in the country for a given period, which affects the cost of living. Effects of inflation on economic performance include slowing down of investment as prices rise, the reduced balance of payment because of low domestic competitiveness, devaluation of the currency, and enlargement of the wealth gap between those with fixed income and those with high bargaining power (Sexton, 2012).
Macroeconomics and Microeconomics Impact on Our Daily Lives
Microeconomic variables impact on our daily lives by influencing our decision-making in terms of preferences of goods and services based on budget constraints. Here, consumers tend to allocate resources efficiently by prioritizing on needs that are the most important at a given time and then going for the less important needs and wants (Gans, King, Stonecash, & Mankiw, 2011). For example, one could be faced with the option of buying a house or starting up a business with a given amount of money. Here, by prioritizing on the house, one will sacrifice on starting a business and preceding potential income that would arise from the business. Alternatively, prioritizing on starting a business would make one forego owning a house and continue staying in a rented house.
On a macroeconomic level, our daily lives and decision-making are influenced by the state of the economy. When economic performance is good, our lives and decisions are positively impacted, and living standards are improved. For example, during the economic boom, there is an increased investment that leads to the creation of more employment opportunities. This leads to increased incomes in the pockets of consumers, thus influencing aggregate saving and consumption. Therefore, living standards improve while consumers make decisions on how much to spend and how much to save or invest (Gans, King, Stonecash, & Mankiw, 2011).
Capitalism and Socialism
Capitalism refers to an economic structure where all the economic decisions are left in the hands of private business owners, with the government only providing a legal framework to conduct business. The advantage that businesses have is that they are left to compete freely in terms of production efficiency and effectiveness. Also, the free market allows businesses to be innovative to maximize profits. On the other hand, individuals benefit from accessing quality and affordable products as firms compete against each other. In socialism, the state takes up resources and distributes them to its citizens through the social welfare program. Therefore, regardless of how hard an individual works or how profitable a business is, the state distributes the gains equally in the whole society. The effect of this is the discouragement of producers and workers to increase their productivity (Schumpeter, 2013).
The US had always influenced the world economy towards capitalism, especially during and after the Cold War, when European and Asian countries started to realize the superiority of America in economic liberalization and wealth creation. For example, the North America Free Trade Agreement has been influential in world economic liberalization. Also, the financial revolution and the emergence of multinational corporations from the USA have made world economies to shift from their socialist structure to capitalism. In the USA, capitalism has benefited businesses by allowing them to compete freely both within and outside the country. Also, increased investments have created many job vacancies for US citizens, thus the reason why the unemployment level in the USA is very low.
Innovation: Case of Steve Jobs from Apple, Inc
Innovation is one of the key ingredients of successful businesses. Every successful entrepreneur has an innovative mind backed by unique qualities that allow him/her to identify opportunities and relentlessly focus his/her mind on utilizing them. One of the entrepreneurs who have changed the business world is Steve Jobs, the co-founder of Apple, Inc. His innovative mind rescued a dying company from becoming one of the most successful technology companies in the world. Known for his marketing prowess, Jobs has built his name in a highly competitive technology industry due to being ahead of the queue in launching new technology (Gallo, 2010). He has endured competition from technology giants, such as HP in computer technology, Microsoft in software technology, and Samsung in smartphones and tablets, among the others. His success has been enhanced by his hard work, ability to identify and utilize opportunities, great vision, sound strategies to pursue the company’s aim, and respect for the employees (Gallo, 2010).
Through his technology, Jobs has developed products that have significantly benefited the society in terms of information processing, communication, and entertainment. For instance, iPod, iPhone, and iTunes have had a great influence on the entertainment sphere, with the consumer being allowed to play, download, and organize digital music, both as audio and video. Also, the iPhone and iPad have revolutionized communication as well as information storage and retrieval.
References
Gallo, C. (2010). The Innovation Secrets of Steve Jobs: Insanely Different Principles for Breakthrough Success. NY, USA: McGraw Hill Professional.
Gans, J., King, S., Stonecash, R., & Mankiw, G. (2011). Principles of Economics. OH, USA: Cengage Learning.
Schumpeter, J. (2013). Capitalism, Socialism and Democracy. Oxford, England: Routledge.
Sexton, R. (2012). Exploring Macroeconomics. OH, USA: Cengage Learning.