Case Studies Case 1

CaseStudies

Case1

Isthe state of the USA designed to replace GDP as the primary measureof economic performance?

Accordingto the case study, “Tracking the U.S economy” the USA will notreplace GDP as the primary measure of economic performance(McEachern,2012).However, it will broaden the conversation and the debates byincorporating many data series. Rather than having one gauge tomeasure economic performance, GDP will have many gauges on thedashboards. Indeed, the United States is planning to have over threehundred indicators, which will compile and displays data. Eventually,the site will be selective rather than encyclopaedic, and developoriginal data.

Accordingto McEachern (2012), the state of USA needs to expand the GPO inorder to provide new measures to estimate the state of US economy.Nevertheless, this does not state that USA will replace GDP as the USmain measure of economy. The measure will not replace GDP, but rathergive a complete view of US economic performance.

Case2

Whatis the hedonic method and why is it sometime used to track changes inthe consumer price index.

Hedonicmethod is a technique that factors out changes in the quality ofgoods that make up consumer price index (CPI). It determines theprice of a certain commodity opt to change due to inflation or changein the quality of the commodity. Therefore, it makes consumer priceindex more accurate. Therefore, hedonic method adjusts the CPI toaccount all the changes of a product to fit in the market.

Hedonicmethod is also used to track changes in the consumer price index(CPI), as well as adjust it to make it more accurate (McEachern,2012).Economists use this method to compare items while devising consumerprice index. CPI measures the affects of inflation on theexpenditures of consumers. The hedonic method divides an item intoits constituent’s attributes to add value. Each attributes is thenweighted on how much it adds or detracts its value. In addition, CPImeasures the cost of living. However, the prices of goods andservices in the market basket are likely to change. Correspondingly,the price change also affects the CPI.

References

McEachern,W. A. (2012). ECON Macro 3 (3rd ed.). Mason, OH: South-Western.&nbsp