Why economic analysis is conditional more than universal?

1) System Complexity The complexity of even the simplest economic system

defies straightforward classification. Stipulating indicators that definitively
represent a country’s economic performance and potential is difficult.
Certainly, managers consult an ever-expanding set of indicators. The
challenge is identifying those that matter, mapping them onto a market, and
monitoring their performance
2) Market Dynamism Often, market changes make today’s valid measures
invalid tomor-row, on a larger scale, analysis anchored in the market
fundamentalism of the West poorly fits the state-sponsored capitalism at play
in the East. Challenges arise in determining how to adjust trusted market
analytics for new circumstances ‫كلما كان التغير في السوق اكثر كلما كانت البيئة اصعب و‬
‫كلما كان السوق مستقر اكثر كان التنبؤ و تعميم النتائج افضل‬
3) Market Interdependence Just as no one is an island, no country is isolated.
The consequence of connections is an integrated system in which actions in
one market influence outcomes in others. Interdependencies complicate
interpretations. Adjusting analysis for actions and reactions across a broad
scope of markets is difficult. ‫كلما كان التداخل اكثر كلما كان التنبؤ اصعب أي كلما كانت‬
‫المتغيرات االقتصادية متشابكة و متداخلة اكثر كانت إمكانية تعميم النتائج اصعب‬
4) Data Overload Managers are flooded with more information, raw knowledge,
and clever insights than ever before

Why government constrains free choice and free enterprise?

That go beyond the need to protect property liberty safety and efficiency .the greater degree of
economic freedom the greater freedom individuals have to decide

What are the components of economic freedome?

Rule of Law Property Rights Freedom from Corruption

Limited Government Fiscal Freedom Government Spending

Regulatory efficiency Labor Freedom .Business Freedom Monetary Freedom

Open Markets Trade Freedom Investment Freedom Financial Freedom

What are the benefit of economic freedom ?

Frist we have to explain economic freedom. Holds that the one has the right to work produce
consume save and invest in the way that one prefers

1) It helps explain a country performance development and potential

2) Higher rated countries generally outperform laggards on a variety of measures they have
higher rates of growth and productivity
 3) Their average income is more than double the worldwide average and seven tiems
higher than in mostly unfree
4) Inflation and employment rate better in economically free countries and also better life
expectancy literacy property reduction and environmental sustainability
5) The message of economic freedom is unequivocal: liberating resources from
government control improves financial performance, economic stability, and
standards of living
6) Higher GDP - Countries, which have economic freedom, has higher GDP compared to
the low GDP countries. The reason is simple because these countries promotes free
trade, rule of law, property rights etc
7) More prosperity - Countries which has economic freedom is more prosperous in all
regards due to high income level of its citizens. These countries are economically
advanced countries
8) Competitive market - As economic freedom promotes free trade, it means all countries
would love to export their product. So, this increases the competitiveness in the market
and consumer gets best product at best price.
Contest between economy freedom and state control?

1) regulates the economy

2) protects property rights
3) sets fiscal and monetary policies
4) enforces antitrust regulation

Methods of economic market

First, we have to explain the mean on market economy: Mostly private (individual or
business) ownership [Link] toward entrepreneurial innovation. Applies the invisible
hand, laissez-faire, property rights, and individualism. Philosophical Anchor: Capitalism

1) Privatization: A necessary condition of a market economy is the state’s sale and legal
transfer of government-owned resources to private interests. Privatization, by letting the
private sector regulate supply and demand, improves production and consumption decisions

2) Deregulation: Government regulations reduce individual choice—i.e., “Government is not a

solution to our problem. Government is the problem. Deregulation helps markets optimize
productivity

3) Property Rights: Property rights give entrepreneurs ownership of their idea, effort, and risk.
Protection boosts economic freedom by assuring individuals, not the government, will prosper
from their ingenuity

4) Antitrust Legislation: Antitrust laws encourage the formation of industries with as many
competing businesses as the market can sustain. They prevent monopolies from exploiting
consumers and restraining market growth

What are the economic indicators measuring?

1) Expanding or contracting
2) Needs a boost or should be constrained
3) Threatened by recession on inflation

How does the measure of economic affect its performance?

GDP: is the broadest measure of a country’s economy. It measures the value of all production in
the domestic economy together with the income that the country receives from other countries
(mainly interest and dividends), less similar payments it has made to other countries.

GNI: is the value of all final goods and services produced within a nation in a given
year, plus the income earned by its citizens abroad, minus the income earned by
foreigners from domestic production. Conceptually, world GNP and world GNI are
equal
GDP: GDP is the total market value of goods and services produced by workers and capital
within a nation’s borders; it provides the truest measure of national economic activity

GDP is a narrow concept as its limited to the bounty of our country and are not allowed
to go beyond it. It shows income of a particular country.

On the other hand, GNI is a wide concept as compared to the GDP. Therefore, there is
higher risk involved in this as compared to the GDP.

GDP shows the power of country’s provincial income output earned by a particular
country.

GNI shows the economic power of the strength of the citizens of the country.

GDP is based on location and GNI is based on the control or the holding, which a
particular citizen possess.

These are the reasons, which are the necessary requirements of the country to develop.
One has to be economically sound to a developed country. For that, it is very important to
keep a balance of the two concepts that is the GDP and the GNI.

Why dose manager improve the GNI?

1) They do not measure the rate of change in an indicator. Interpreting present and
forecasting future performance
2) GNI per capita does not account for the cost of living from one country to
another.
3) it presumes that a dollar of income in any country has the same purchasing power as a
dollar of income in other country
4) GNI per capita is unable to tell us much about how many goods and services
one can buy with a unit of income in one country relative to how much one
can buy with a unit of income in another
5) Measuring the monetary quantity of market activity through GNI, GNP, and GDP—
without accounting for the associated social and ecological costs that result from the
activity that generated economic growth—misrepresents performance and
misinterprets potential
6) validity of monetary aggregates as performance measures people in rich countries do
not appear to be any happier than people in poor countries. No matter how high income
 rose, little evidence indicated that it improved people’s reported happiness some
contend that GNI and its offshoots are at best mislead-ing, and at worst, flawed
(as some point out, the expense of war boosts the economic growth rate

Managers improve the usefulness of GNI by

Adjusting it for the• Growth rate of the economy

• Number of people in a country

Local cost of living purchasing power of local currency

Rate of economic growth how its affect the grosses

1) They do not measure the rate of change in an indicator. Interpreting present and
forecasting future performance

2) The growth rate of GNI indicates a country’s economic potential: If it grows faster
(or slower) than its population

3)The growth rate of GNI also indicates business opportunities

How does the population size adjust GNI?

Adjusting GNI by population, therefore, lets managers remove the effects of

demography in assessing a country’s relative performance. For example, GNI may be
low in absolute terms but it may ranked first in the world such as Norway

‫ممكن يكون الدخل القومي اإلجمالي عالي و لكن نصيب الفرد متدني‬

What are the benefit of international dollar (or benefit of adjusting purchasing power
parity)?

1) determining how much money is needed to purchase the same goods and
services in two countries and using that information to calculate an implicit
foreign exchange rate that reflects the same purchasing power, per unit of
currency
2) Second, PPP reduces some of the otherwise extreme variability in many country-
tocountry comparisons

Sustainability: Sustainability perspectives hold that the objective of economic activity is to

create an enabling environment for people to enjoy long, healthy, and happy lives,
sustainable development proponents encourage interpreting economic activity in
terms of its capacity to “meet the needs of the present without compromising
the ability of future generations to meet their own needs
Fully understanding growth, progress, and prosperity calls for assessing the
consequences of economic choice on sustainability and stability
Compare between GPI and GDP

GDP, GPI values voluntary and unpaid household work as paid labor and sub-
tracts the costs of crime, pollution, and family breakdown. Effectively, GDP
versus GPI is analogous to the difference between the gross profits versus net
profits—net is gross less the costs incurred. Accordingly, GPI will equal zero if the
costs of pollution, crime, and family breakdown, holding all other factors
constant, equal the monetary gains from the production of goods and services
How does the sustainability adjust the economic measures?
• Net National Product (NNP): Measures the depletion of natural resources and degradation
of the environment that result from generating GNI. As a company must depreciate its
tangible and intangible assets when making a product, goes this reasoning, so too should
countries. NNP does so by depreciating the country’s assets commensurate with their use to
generate growth.75•

Genuine Progress Indicator (GPI): Starts with the same accounting framework used to
calculate GDP but then adjusts for values assigned to environmental quality, population
health, livelihood security, equity, free time, and educational attainment. For example,
unlike GDP, GPI values voluntary and unpaid household work as paid labor and sub-tracts
the costs of crime, pollution, and family breakdown. Effectively, GDP versus GPI is analogous
to the difference between the gross profits versus net profits—net is gross less the costs
incurred. Accordingly, GPI will equal zero if the costs of pollution, crime, and family
breakdown, holding all other factors constant, equal the monetary gains from the
production of goods and services

Human Development Index (HDI) Matters of human development do not show up

immediately in income or growth figures. Ultimately, the reasoning goes, they
will, given that improving the human condition improves economic
performance. So, estimating a country’s degree of human development, in
terms of the physical, intellectual, and social standards that shape a country’s
overall quality of life, helps managers to measure market potential.76 The United
Nations translates this view into the HDI and its components: Longevity, as
measured by life expectancy at birth; Knowledge, as measured by the adult literacy
rate and the combined primary, secondary, and tertiary gross enroll-ment ratio; and
Standard of Living, as measured by GNI per capita expressed in PPP for U.S. dollars
WHY defining happiness is difficult?
Like beauty, is often in the eye of the beholder. Potential indicators, such as love,
friendship, family relations, and actualization, are tough to pin down. In addition,
how does one value goals, like safe streets and clean air, which can be measured

Presently, estimation is difficult. Defining happiness, like beauty, is often in the

eye of the beholder. Potential indicators, such as love, friendship, family
relations, and actualization, are tough to pin down. In addition, how does one
value goals, like safe streets and clean air, which can be measured? The
intricacies of happiness capture increasing attention; insight should clarify
measures. In the meantime, managers consider the following indices:• Your
Better Life Index (YBLI) This index measures well-being and perceptions of living
conditions. Developed by the Organization for Economic Cooperation and
Development (OECD), the YBLI advocates evaluating economic performance in
terms of matters that people worldwide believe are important, such as housing,
jobs, social relationships, health, security, work-family balance, and education,
but that fall beyond the narrow scope of monetary measures. Explained the
OECD, YBLI pushes the “boundaries of knowledge and understanding in a
pioneering and innovative manner . . . It has extraor-dinary potential to help us
deliver better policies for better lives.”82 The top ten countries, in terms of the
YBLI and beginning with the leader, are Denmark, Canada, Norway, Australia, the
Netherlands, Sweden, Switzerland, Finland, Israel, and Austria.83• Gross National
Happiness (GNH): Progressive society presumes that material and spiritual
development occur side by side; one reinforces the other or both suffer. GNH
measures a country’s ability to promote equitable and sustainable
socioeconomic development, preserving and promoting cultural values,
conserving the natural environment, and establishing good governance.• Happy
Planet Index (HPI): Utilitarian views hold that people aspire to live long, healthy,
happy lives. Therefore, a country’s economic performance and potential is
represented
Why we study economic analysis?
To measure potential and performance of the country
And to study investment choice in foreign country
Refine analysis and elaborate interpretation