Macroeconomics : Measuring Economic Activity - AS & AD

National Income

The value of all goods and services produced in a country within a certain time period.

The Output Method

Measures national income by calculating the value of all finished goods and services produced in the country's economy in a year.

The Income Method

Measures the national income by calculating the sum of wages, rent, interest, and profits in a year.

The Expenditure Method

Measures the national income by calculating the total amount of expenditure in the economy in a year.

Gross Domestic Product

The value of a country's output of finished goods and services in a year.

Gross National Income

The value of a country's output of finished goods and services in a year, plus incomes from abroad.

Real GDP/GNI

[GDP/GNI], adjusted for inflation by using constant prices.

Real GDP/GNI Per Capita at Purchasing Power Parity

[Real GDP/GNI], adjusted for the cost of living in countries.

Business Cycle

A model that describes both the short and long term trends in economic activity over time.

OECD Better Life Index/Happiness Index/Happy Planet Index

An alternative to national income as a measure of wellbeing.

Aggregate Demand

The total value of all goods and services consumers are willing and able to purchase in an economy per year.

Aggregate Supply

The total value of all goods and services producers are willing and able to sell in an economy per year.

Inflationary Gap

Exists when an economy's real GDP exceeds its potential long-run full employment output.

Deflationary Gap

Exists when an economy's real GDP is below its potential long-run full employment output.

Full Employment

Exists when an economy is at its natural rate of unemployment, and the economy is operating at its full capacity.

Natural Rate of Unemployment

The level of employment at when the economy is operating at full employment, consisting of seasonal, frictional, and structural unemployment.