What are the economic implication of misery index to macroeconomic policy? Although the misery index is not a good gauge of socioeconomic performance l
Hi @Kingsley M.oserei,
The misery index is an indicator that is used to determine how economically well off the citizens of a country are. It is the sum of the unemployment and underemployment rate and the inflation rate of the particular period.
These factors are important be-cause they pose economic and social costs to the average income earner. An increase in the misery index is triggered by an increase in either variable, and signifies economic discomfort and negative consumer sentiment.
Climbing misery index implies declining economic ac-tivity and reduced consumption. This is because unemployed people are underutilized and rising prices will discourage rational con-sumers from spending. This can cause or complicate an economic slowdown or contraction. There will also be increased debt, as the FG borrows money to increase social support schemes.
In the end, the citizens will be left with high uncertainty and low morale.
Furthermore, it is believed that consecutive rises in the misery index usually lead to a decline in the favourability ratings of the serving administration, and could result in a re-election loss for the incumbent. This was the case for U.S. President Ford and Jimmy carter, whose terms saw the misery index reach all-time highs.
Cheers
Macroeconomic policy is commonly based on utilitarianism. It is taken when there are more people who become fortunate than those who become unfortunate. This misery index might provide policy makers the intensity dimension of those who become unfortunate. Consequently, they may come up with more appropriate policy.
- Badges
- Science topic