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Gross National Product

The most fundamental measure of the economy’s overall performance is the gross national product (GNP) — the total market value of all goods and services produced in an economy in a given year.

In the USA the GNP is typically expressed in two ways. Measured in current dollars, the GNP reflects actual prices, as they exist each year; measured in constant dollars, GNP reflects the actual data adjusted to the prices of the arbitrarily chosen previous year.

Although GNP is a very broad indicator of the state of the national economy, it has significant drawbacks. It does not take into account the growth of leisure time, the quality and variety of goods and services, or the distribution of total output among society members — all factors of concern to marketing planners.

Personal Income

Personal income is a total income received by people from all sources. It is usually reported either per capita or per household and is important to marketers because it is a crucial measure of consumers’ buying power.

Since people must pay taxes out of their incomes, income is also reported as disposable income, the amount left after taxes. In addition, government statisticians report on discretionary income, money left after people pay not only for taxes but also for such necessities as food, shelter, and clothing. To marketers of bread and milk, the amount of disposable income remaining to an individual or household is an important economic indicator; producers of stereos and microwave ovens find data on discretionary income more useful.

Americans, for example, spend about 95% of their disposable income for personal consumption and save the rest. Of the money spent on personal consumption during the last several decades, an increasing amount has been devoted to services rather than goods. Although every household has slightly different spending priorities, on average about $70 out of every $100 goes on necessities — food, housing, transportation, household operations, and medical care.

Inflation and Interest Rates

The general health of the economy can also be measured by the rate of inflation and the rates of interest consumers and businesses are charged by lenders. Inflation is the rise of the general price level of all goods and services. Looked at another way, it is a decline in the purchasing power of a unit of money. Consequently, when the inflation rate is high, consumers and businesses cannot purchase as much as when inflation is low. Marketers are thus strongly affected by the ups and downs of inflation.

Interest is the price paid for loaned funds over a period of time, usually expressed as a percentage per year. Rising interest rates reduce the willingness and ability of consumers to make purchases and businesses to make investments. High rates of inflation and interest contribute to a recession — a downward phase of a business cycle resulting in a falling of business and consumer optimism.

Anticipating changes in inflation and interest rates is quite difficult because such changes are produced by a complex set of causes. Nevertheless, economists continually attempt to project the courses of inflation and interest rates; marketers must pay attention to such predictions, since consumer demand is so directly affected by the overall health of the economy.

Active Words and Phrases:

environment

навколишнє середовище

personal income

особистий дохід; персональний дохід

variables

змінні

per capita

в розрахунку на душу населення

trend

тенденція; тренд

buying power

купівельна спроможність

gross national product

валовий національний продукт (ВНП)

necessities

предмети першої необхідності

disposable income

дохід після сплати податків; дохід, яким можна вільно розпоряджатися

household

домашнє господарство; родина (статист.)

discretionary income

дохід після сплати податків та придбання предметів першої необхідності

on average

в середньому

overall performance

робота, функціонування

lender

кредитор

value

цінність, вартість

decline

зниження

interest rate

процентна ставка

recession

рецесія; спад

distribution

розподіл

purchase

закупівля; покупка

total output

загальний випуск

durable goods

товари довготривалого вжитку