DATA EXERCISE #3

Economic Assessment of States

The economic assessment of nations is a potent measure of how a country is performing. This data report indicates the assessment through GDP, GDP per capita and selected qualitative measures from heritage.com. The selected countries will be used as a sample to explain the economic state of the nations. Therefore, the first part indicates the use of GDP and GDP per capita whereas the second part is useful for the analysis through qualitative measures of trade, property rights, financial freedom and business.

Table 1 : GDP rankng

 Table 2: GDP per capita Ranking

The listing above is the country ordered by GDP and the GDP per capita. The order is not the same indicating the disparity in aggregate output versus output per individual within the country. The United States has the highest GDP which is expected given the strength of the dollar, the superiority of its financial and banking institutions as well their dominion in the tech sector which is the most influential and most lucrative sector on the planet at the moment (Abel et al., 2018). China follows close behind as the country has a large population indicating a high gross domestic product for the country in the long run. United Kingdom, Canada, Russia, and Italy have a gross domestic product higher than a billion dollars (The World Bank, 2020). However, approaching the setup from the angle of GDP per capita, there is a palpable variation in the order of the countries. The first is the United States with the highest GDP per capita followed by Australia, Canada, the United Kingdom, Italy Saudi Arabia, and then finally China. This indicates that qualitatively, the countries with the highest GDP per capita have a better quality of life amidst production. Therefore, the two scenarios indicate the variation in the estimation of country output through aggregation and per capita.The entire exercise has indicated that the GDP per capita is a better estimator of national output. Aggregated output in a big population indicates a lower dimensional level of production. China, therefore, has a big GDP VALUE because of its more than a billion people. However, the quality of production is lower than in other countries with less than half the Chinese population. This indicates that the latter countries have a superior level of production whereby the higher quality in processes and production leads to a higher GDP (The World Bank, 2020). The aggregation of all the sectors of production will lead to the comprehensive output which is the GDP. Developed nations are distinguishable from their higher GDP per capita as opposed to the less developed nations. The dataset indicates the Central African Republic is the lowest, followed by Tanzania, Kenya, Nigeria, and then India. These countries are the less developed countries in the dataset Therefore, the GDP per capita is an appropriate indicator of the development levels in the country.

Table 3: Overall Score

The ecnomic freedom overall rank has been portrayed in the first table whereas the second table indicates four components of the overall score. The business score is a measure of the ease of conducting business dealings within the country in question. The level of economic activity in every country is a function of how easy it is to start and run a business enterprise. The wide range of forms of business units inclusive of a sole proprietorship, partnerships, cooperative societies, and limited liability companies in both the public and private forms are various business forms (Heritage, 2022). However, the level of capital required varies and increases business complexity which further increases the impact of the business on the organization. Therefore, the business score is a reliable metric of the impact of the business within the country in question.Moreover, trade indicates the exchange of commodities within and without the country. Imports and exports are reliable components of the gross domestic product and the value of net exports affects the magnitude of the output within the nation. Furthermore, if the export is significantly high it could theoretically lead to a higher GDP per capita (Heritage, 2022). This indicates that the trade score indicates the level of efficiency in maintaining positive net exports as well as a favorable balance of payment as an ideal economic indicator. Moreover, the level of financial freedom is a measure of indication of the quality of lifestyle amongst the population of the selected nation. Therefore, financial freedom is significantly correlated with a favorable GDP per capita given in the first section. The level of financial freedom of the nation is therefore a potent economic indicator of how the nation progresses forward (Heritage, 2022). Finally, the property rights score indicates how convenient it is for individuals and organizations to be owners of the property. Given the fact that land is a very pertinent factor of production, the level of property rights of the nation is a significant economic indicator of how far the nation can go as far as production is concerned (Heritage, 2022). Thus, property rights scores are also significantly correlated with GDP per capita. Therefore, trade, financial freedom, property rights, and business levels are proper economic indicators of the economic performance of a particular nation

The contrast between these four indicators and the quantitative outlook of the gross domestic product is palpable. The latter assumes a qualitative approach. Furthermore, the gross domestic product is an aggregation and is assumptive and the assumptions might not sufficiently cover the nuances within a complex economy. The latter score accommodates numerous dimensions with a significant contribution to the economic state of the nation. The latter scores are therefore more descriptive of the true economic state of the nation at the time t. This renders them superior to GDP for comprehension and explanation purposes. However, GDP and GDP are superior for the estimation and ranking of the countries in an objective manner as it is an unbiased, consistent, complete, and sufficient estimators of the economic output of the nation. Therefore, both avenues are a sufficient metric for the economic rankings of countries.

References

Abel, A. B., Bernanke, B., & Kneebone, R. D. (2018). Macroeconomics. Pearson.

Heritage. (2022). Economic Data and Statistics on World Economy and Economic Freedom. Www.heritage.org. https://www.heritage.org/index/explore?view=by-region-country-year?&countryIds=175®ionIds=&yearIds=27

The World Bank. (2020). World Development Indicators | DataBank. Worldbank.org. https://databank.worldbank.org/source/world-development-indicators#