2.1 - The Measurement of Macroeconomic Performance

Nominal GDP

Total value of goods and services - not including effect of inflation

Real GDP

Nominal GDP, adjusted for inflation

Real GDP per capita

Real GDP

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Population

CPI - Consumer Price Index

Measures the changes in prices of a basket of household goods for U.K. households.

RPI - Retail Price Index

CPI, including housing costs

What are 2 ways of meausring unemployment?

Labour Force Survey and claimant Court

LFS (Labour Force Survey)

Quarterly survey which meaures the number of people who have looked for work in the last month and are available to start work immediately.

Claimant Court

Measures the number of people who are actually claiming benefits

National income

Measures the total value of goods and services produced in an economy

What are 3 ways of calculating National Income (NI)?

Income method, Output method, and Expenditure method

Income method

Money received by firms from all of their different sources (e.g. Profits from private sector businesses)

Output method

How much is produced in the economy (e.g. Value added from primaryt, secondary, manufacturing and quaternary sectors)

Expenditure method

GDP, Consumption, and Government spending

Income = Output = ?

Expenditure

3 injections into the circular flow?

Exports, Government spending and Investment (EGSI)

3 withdrawals into the the circular flow?

Imports, Taxation, and Savings (ITS)

When injections > leakages, GDP …

increases

When injections < leakages, GDP …

decreases

What happens at equilibrium?

Injections = Leakages