Final answer:
Economic indicators like GDP, interest rates, and new orders for consumer durables help measure the economy's health. They guide personal financial decisions and assist in shaping international relations and economic policies.
Step-by-step explanation:
To measure the health of an economy, economists use various economic indicators. One of the key statistics used is the Gross Domestic Product (GDP), which represents the total value of all goods and services produced over a specific time period. It is the broadest measure of a nation's economic activity.
The development of GDP as an economic indicator is credited to Simon Kuznets. Besides GDP, there are other indicators classified into three main categories: (1) Leading indicators, like new orders for consumer durables, which predict future economic activity; (2) Coincident indicators, like employment rates, that reflect the current state of the economy; and (3) Lagging indicators, such as interest rates, that reveal the outcome of past economic activity.
These indicators are not just complex numbers for policy makers; they can also guide individuals in making personal financial decisions. Monitoring these can help understand trends such as inflation rates, job growth, and the overall economic outlook, which affect decisions like investing and making major purchases.
Economic indicators also play a critical role in global affairs. They assist countries in making decisions regarding international trade, military engagements, political treaties, and diplomatic relations, thereby fostering globalization and development.