The economy of a nation greatly plays an important role in ensuring the well-being of the people. The government should ensure the adoption of policies that will enhance great economic performance for the stability of the citizens and various enterprises in different sectors in the nation’s economy. Prices of commodities is one of the measures of the performance of a nation’s economy whereby high prices portray unstable economy whereas low and affordable prices portray a stable and a good economic performance. Supply and demand are some of the major factors that help in determining the prices of goods and services in an economy.
When the supply of goods and services exceeds the demand, the prices of the commodities fall. In contrast, when the demand for goods and services is more than the supply within economy, the prices tend to increase. The government should ensure that they implement various policies that aim at stabilizing the supply of various commodities to make it sustainable for the citizens to survive in the economy. This implies that there is an inverse relationship between the demand and supply within a particular economy. For example, during harvesting season, the supply of vegetables into the market increases and exceeds the demand which results into a decrease in the prices of the vegetables.
Wages also play an important part in the economy since labor is a significant factor in the production process. Production ensures a steady supply of commodities required within an economy and hence there should be favorable policies that govern wages in a nation. When the minimum wage in an economy is set at a higher rate, the labor costs that most employers in various enterprises will increase making the economy unfavorable for investment. A high minimum wage also has a direct negative impact on the citizens of a nation since it will cause price inflation for various commodities and affect export businesses and increase. The nation will also suffer increased unemployment rates since the employers will reduce the number of employees to reduce production costs.
Financial institutions such as banks and various savings and credit facilities also have a significant impact on the economic performance of a nation by accumulating and mobilizing capital in the economy. Commercial banks within most nations have a great control over the interest rates in an economy. An increase in interest rates within an economy implies that the people will be discouraged to borrow money from various financial institutions. A decrease in interest rates will motivate more individuals and enterprises to borrow more financial resources from banks which leads to inflation. For example, most individuals will opt to have savings accounts in banks with favorable interests.
Inflation within a nation is one of the indicators of a good economic performance since the citizens have more financial resources to invest in various businesses. When the citizen has more money at their disposal they find it affordable to survive in the nation. Interest rates and inflation have a direct impact on the economic development of a nation. Favorable interest rates enable most organizations to acquire financial resources which can be utilized in financing various factors of production such as labor. Favorable interest rates also help in enhancing the inflow of more foreign capital in the nation.
Employment and unemployment rates are greatly interrelated with a nation’s economic performance. When the economy is stable, it is expected that the levels of unemployment will reduce since more employers will require more workers within their organizations due to a favorable minimum wage. The rates of employment also have a great impact on the spending habits of the citizens. When one is employed, they have income to spend which increases their lining standards. In contrast, when the unemployment rates are high, the spending rates tend to be low since the citizens to not have more financial resources to spend in the economy.