Edexcel Economics (A) Theme 2 - Measures of Economic Performance

A complete list of vocabulary flashcards covering key terms and concepts for Theme 2.1 Measures of Economic Performance from Edexcel Economics (A).

Economic growth

Occurs when there is a rise in the value of Gross Domestic Product ($GDP$), indicating an increase in national output.

Gross Domestic Product (GDP)

A measure of the quantity of goods and services produced in an economy within a specific time period.

Real GDP

The value of Gross Domestic Product ($GDP$) adjusted for inflation.

Nominal GDP

The value of Gross Domestic Product ($GDP$) without adjustment for inflation.

Total GDP

The combined monetary value of all goods and services produced within a country's borders during a specific time period.

GDP per capita

The total Gross Domestic Product ($GDP$) value divided by the population of the country, measuring average output per person.

Volume of GDP

The size of the basket of goods and real level of Gross Domestic Product ($GDP$), adjusted for inflation.

Value of GDP

The monetary value of Gross Domestic Product ($GDP$) at current prices of the day, calculated as volume multiplied by current price level.

Gross National Product (GNP)

The market value of all products produced in an annum by the labour and property supplied by citizens of a country, including Gross Domestic Product ($GDP$) plus income earned from overseas assets minus income earned by overseas residents.

Gross National Income (GNI)

The sum of value added by all producers residing in a nation, plus net overseas interest payments and dividends.

Purchasing Power Parity (PPP)

A theory estimating how much the exchange rate needs adjusting so that transactions between countries are equivalent according to each currency's purchasing power.

Inflation

The sustained rise in the general price level over time, resulting in an increased cost of living and decreased purchasing power of money.

Deflation

A fall in the average price level across the economy, represented by a negative inflation rate.

Disinflation

A fall in the rate of inflation, where the average price level is still rising but at a slower rate than before.

Consumer Prices Index (CPI)

The official UK measure of household purchasing power and average price changes of a weighted basket of goods, updated annually via the Family Expenditure Survey.

Retail Price Index (RPI)

An alternative UK inflation measure that includes housing costs such as mortgage interest payments and council tax, while excluding low-income pensioners and the top $4\%$ of earners.

Demand-pull inflation

Inflation resulting from the demand side of the economy when aggregate demand grows unsustainably, creating pressure on resources near full capacity.

Cost-push inflation

Inflation originating from the supply side of the economy when businesses face rising costs of production, such as higher raw material or labour costs.

Hyperinflation

An extraordinarily high and uncontrollable rate of inflation usually triggered by extreme increases in the money supply faster than real output growth.

Claimant Count

A measure of unemployment that counts the number of individuals claiming unemployment-related benefits, such as Job Seeker's Allowance ($JSA$).

Labour Force Survey (LFS)

A survey conducted by the International Labour Organisation ($ILO$) directly asking individuals if they have been out of work for $4$ weeks, are able and willing to start within $2$ weeks, and are available for $1$ hour of work per week.

Unemployment

A state where individuals who are able and willing to work, actively seeking employment, and ready to start within two weeks are without a job.

Underemployment

A situation where workers are employed, but their labour is not utilized to its full productive potential, such as part-time workers seeking full-time positions.

Economically inactive

Individuals of working age who are not employed and are not actively looking for jobs, such as retirees, carers, disabled individuals, or discouraged workers.

Structural unemployment

Long-term unemployment resulting from a permanent decline in demand for goods and services in a specific industry, worsened by occupational and geographical immobility.

Frictional unemployment

Temporary unemployment that occurs during the period when a worker is between leaving one job and finding another.

Seasonal unemployment

Unemployment occurring at specific times of the year when demand for certain types of labour fluctuates, such as in tourism.

Demand deficiency (cyclical unemployment)

Unemployment caused by a systemic lack of aggregate demand for goods and services, typically occurring during economic downturns or recessions.

Real wage inflexibility

Unemployment caused by wages being held above the market-clearing equilibrium level, such as by a national minimum wage ($NMW$), creating excess labour supply of $Q_1 - Q_3$.

Balance of payments

A financial record of all monetary transactions between consumers, firms, and the government of one nation and the rest of the world.

Exports

Goods and services sold to foreign countries that generate a positive inflow of money on the balance of payments.

Imports

Goods and services bought from foreign countries that result in an outflow of money on the balance of payments.

Current account

A section of the balance of payments recording the net balance of trade in goods and services, primary income, and secondary income.

Current account deficit

A state where a country spends more money on imports from foreign countries than it earns from its exports to foreign countries.

Current account surplus

A state where export earnings exceed import expenditures, creating a net inflow of money into the circular flow of income.