Macro 3.1 - Measures of economic activity & its varations

3 ways of measuring national output/income

Expenditure approach

Income approach

Output approach

Expenditure approach

Adds up all spending to buy final goods/servics produced within a country over a time period (to avoid double counting)

Income approach

Adds up all income earned by the FoPs that produce all goods/services within a country over a time period

Output approach

Calculates value of final good/service produced within a country over a time period

Gross Domestic Product (GDP)

Market value of all final goods/servics produced in a country over a time period (within a nations borders)

Gross National Income (GNI)

Total income recieved by residents of a country, equal to the value of all final goods/services produced by the FoPs supplied by the countrys residents regardless of where the factors are located.

Nominal values

Without inflation

Real values

With inflation accounted for

Purchasing Power Parity (PPP)

Amount of a countrys currency that is needed to buy the same quantity of local goods/services that can be bough w/ 1$

• Allows to make buying power comparisons

Inflation

Sustained increase in prices

Buisness cycle

Consists of short term fluctuations in the growth of real output, which are the altering periods of expansion (increasing real output) & contraction (decreasing real ouput)

Long term growth trend

represents average growth of the economy over a long period of time. This trend also represents potential ouput for the economy.

Economic development

Increasing the standards of living

OECD better life index

based on number of factors the member countries selected as factors that make a better life

Happiness index

By the UN sustainable development network & includes measurements that try to quantify & measure happiness

Happy planet index

By the new Economics foundation, attempts to quantify sustainable well being

OECD Better Life indicators (11)

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Happiness index indicatorss

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Happy planet index indicators

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