4.2.1. The measurement of macroeconomic performance

Define ‘real GDP’.

Real GDP measures the quantity of goods and services produced in an economy.

What does a rise in economic growth mean?

A rise in economic growth means an increase in national output.

What is the difference between Real and Nominal GDP?

Real GDP is adjusted for inflation.

E.g if economy grew by 4%, but inflation is 2%, real economic growth is 2%.

Define ‘real GDP per capita.’

Real GDP per capita is the value of real GDP divided by the population of a country.

What are the two measurements of inflation?

CPI (Consumer Price Index) and RPI (Retail Prices Index)

What does CPI measure?

• CPI measures household purchasing power with the Family Expenditure Survey. (Survey finds out what consumers spend their income on).

• From this, a basket of goods is created.

What does the RPI measure?

The RPI, unlike CPI, includes housing costs, like mortgage interest & council tax.

What are the two main measures of employment?

The Claimant Count & the Labour Force Survey.