What makes a strong economy?

It’s easy to think of economic indicators like gross domestic product (GDP), interest rates, unemployment rates, inflation, etc. These are all important in telling us what’s going on in the economy. However, a lot of this data is affected by what’s happening outside the country too. For instance, if a country’s political economy comes crashing down, you might expect its GDP to drop. But that might mean there’s no job growth, and so the unemployment rate goes up.

A strong national economy is also typically characterized by higher interest rates, being able to make more goods and services available to consumers, and being better able to withstand recessions when they do occur. A strong currency helps this along, by lowering import costs. The lower the import cost, the lower the price of imported goods increases in value, leading to a boost in demand, and hence, a boost to inflation. In a weaker country, lower interest rates mean lower spending power, with less money available to enjoy current consumer goods, and an increase in long-term debts. A weaker currency, on the other hand, boosts exports and leads to higher inflation.