What Is the Importance of Statistics in Economics?

What Is the Importance of Statistics in Economics?

What Is the Importance of Statistics in Economics?

The importance of statistics in economics starts with economics research methods. These are used to collect and analyze data for factors, such as per capita income and inflation rate.

Economics
Statistics play a major role in this field and they feed into each since both are largely number- and fact-based. Three primary uses that show the importance of statistics in economics include analyzing data, collecting information and testing hypotheses.

For example, statistical information is used to determine supply and demand for exports and imports. The United States Census Bureau is another good example. They collect information to determine a variety of statistical information, such as the number of people living in a specific state.

Economics uses statistical significance often to get necessary facts and figures. When something is considered to be statistically significant, it means that it is not likely to happen as a result of chance or randomness. It has a very specific and identifiable cause.

When looking at economics on a larger scale, such as with the U.S. government, statistics are used to determine and influence policy. For example, statistics of consumption show how people are spending their money. This can help people to determine the average rent or mortgage across the county.

Another example is the statistics of production. This allows the government to compare its wealth to previous years. With this information, lawmakers are able to determine if changes are needed concerning economic policies. There are different branches of economics that rely heavily on statistics. These include banking, accounting and management.

Banking
Banks rely on people and companies depositing money and then leaving at least some of it in their respective accounts. They then essentially lend what is available and earn on this via collecting interest. They use statistics to determine a person's interest rate in this case, as well as the amount a person might qualify for. Banks use this to also determine the percentage of people using specific services, such as student loans or checking accounts.

Accounting
The reports used by accounting professionals rely heavily on statistics. For example, when they are balancing accounts, it is imperative that the numbers are precise. This is because these figures are utilized to show a company's success. It will play a role in factors, such as determining whether to expand products or services to consumers. Accountants might also take advantage of statistics to look at trends in the company before making changes or major decisions. Lastly, statistics can also be used to create projections that will be utilized to make changes or decisions for the next year of business.

Management
Management for a company uses statistics to help determine their budget for the next year. The statistical data can essentially show a company what is working and what is not. This makes it possible to determine how to proceed with the products or services they offer consumers.

The management of the country also relies on statistics. For example, this is used when the federal government is determining whether to raise the minimum wage or Social Security payouts for citizens.