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four main macroeconomic indicators
the rate of economic growth
the rate of inflation
the level of unemployment
the state of the balance of payments
what is the national output
the output of all the goods and services produced by a country
how can output be measured
volume - the quantity of goods and services produced in one year
value - the value (£billions) of all the goods and services produced in one year (GDP)
other ways of calculating GDP
the total amount of national expenditure
the total amount of national income
how is economic growth measured
as a percentage
what is a boom
a sustained period of high economic growth rates
what is a recession
negative economic growth for two or more consecutive quarters
what is a slump
a sustained period of recession
what is an economic depression
a sustained economic downturn which lasts for a long period of time (several years)
what is nominal GDP
GDP that hasnt been adjusted for inflation, the figure is misleading as it will give the impression that GDP is higher than it is
what is real GDP
GDP that has been adjusted for inflation
what is GDP per capita
output per person
what is GDP per capita used for
to indicate the standard of living in a country
the higher the GDP per capita, the higher the standard of living in a country
what is gross national income
the GDP plus net income from abroad (any income earned by a country on investments and other assets owned abroad)
what is gross national product
the total output of the citizens of a country, regardless of whether they are a resident
disadvantages of using GDP per capita to compare living standards
different countries use different currencies and the exchange rate might not reflect the true worth of the two currencies
what is purchasing power parity
PPP is the real value of an amount of money in terms of what you can actually buy with it.
eg - $1 in Malawi will buy more goods than in a more developed country
advantages of using PPP to compare living standards
using PPP involves adjusting the GDP per capita to take into account the differences in purchasing power, which makes for a more accurate comparison
disadvantages of using GDP to make comparisons
the extent of the hidden economy (economic activity that doesnt appear in official figures
public spending - some governments provide more benefits, eg - two countries with similar GDP but one might spend more money per person to improve living standards
the extent of income inequality
other differences like the hours of work per week, working conditions, environmental damage and spending needs
what are index numbers used for
index numbers are used to show percentage changes in GDP over a period of time to make comparisons between two economies
what is inflation
the sustained rise in the average price of goods and services over a period of time
inflation can also be seen as a fall in the value of money
what is negative inflation/deflation
where the average price of a good or service is falling
what is hyperinflation
when prices rise extremely quickly and money rapidly loses its value
what is disinflation
where the rate of inflation is slowing down, the prices are still rising but at a lower speed
what is the retail price index (RPI)
a measure of the general level of prices based upon a basket of 650 common household goods, each contributing to the overall price level proportional to their share in consumer expenditure.
what is the first survey used in the RPI
the living costs and food survey
used to find out what people spend their money on and what proportion of income is spent
what is the second survey used in the RPI
the second survey is based on prices - it measures the changes in price of around 700 commonly used goods (the basket of goods).
