IB ECONOMICS ch 13&14

Nominal GDP

The total value of all goods and services produced in a country at current prices, without adjustment for inflation.

Real GDP

The total value of all goods and services produced in a country, adjusted for inflation, reflecting the true value in constant prices.

GDP per capita

The economic output per person, calculated by dividing the GDP of a nation by its population.

GNI

Gross National Income, which measures the total income earned by a country's residents and businesses, including any income earned abroad.

Business Cycle

The fluctuations in economic activity characterized by periods of economic expansion and contraction.

Aggregate Demand (AD)

The total demand for all goods and services within an economy at a given price level and in a given period.

Components of AD

The four components of Aggregate Demand are consumption, investment, government spending, and net exports.

Factors affecting consumption

Factors include consumer confidence, income levels, interest rates, taxation, and social trends.

Investment Changes

Investment changes can be influenced by business expectations, interest rates, and economic forecasts similarly to consumption changes.

Impact of government spending on AD

An increase in government spending directly raises Aggregate Demand; conversely, a decrease reduces AD.

Imports and Exports Influences

Factors impacting imports and exports include exchange rates, trade policies, economic conditions, consumer preferences, and global demand.

Macroeconomic Variables

The five main variables of macroeconomics are GDP, unemployment rate, inflation rate, interest rates, and national income.

Methods for measuring national income

Three methods include the production approach (total value of output), income approach (total income earned), and expenditure approach (total spending on final goods and services).

Non-recorded GDP items

Five things not recorded in GDP/GNI include informal economy transactions (e.g., babysitting), volunteer work, household production (e.g., cooking), illegal activities (e.g., drug sales), and local barter transactions.