1.2 Macroeconomic Indicators

Question 1

How can the performance of an economy be measured?

Answer 1

• Real GDP
• Real GDP per capita
• CPI and RPI
• Measures of unemployment
• Measures of productivity
• Balance of payments on current account

Question 2

What is GDP?

Answer 2

• GDP measures the quantity of goods and services produced in an economy (national output).
• In other words, a rise in economic growth means there has been an increase in national output.

Question 3

What is real GDP?

Answer 3

• Real GDP is the value of GDP adjusted for inflation.

-For example, if the economy grew by 4% since last year, but inflation was 2%, real economic growth was 2%.

Question 4

What is Real GDP per capita?

Answer 4

• Real GDP per capita is the value of real GDP divided by the population of the country.
• it essentially measures the average output per person in an economy.
• This is useful for comparing the relative performance of countries.

Question 5

What are CPI and RPI?

Answer 5

• They are measures of inflation in the UK

Question 6

What does CPI measure?

Answer 6

• Measures household purchasing power with the Family Expenditure Survey.
• The survey finds out what consumers spend their income on.
• From this, a basket of goods is created.
• The goods are weighted according to how much income is spent on each item.
• Petrol has a higher weighting than tea, for example. Each year, the basket is updated to account for changes in spending patterns.

Question 7

What is RPI?

Answer 7

• RPI is an alternative measure of inflation.
• Unlike CPI, RPI includes housing costs, such as payments on mortgage interest and council tax.
• This is why RPI tends to have a higher value than CPI.

Question 8

What are the two main measures of unemployment?

Answer 8

• The Claimant Count
• The International Labour Organisation (ILO) and the UK Labour Force Survey (LFS)

Question 9

What are measures of productivity?

Answer 9

• Productivity is defined as output per worker per period of time.
• It measures how efficient production is.
• Productivity increases if more output can be produced with fewer units of input.

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Question 10

What is the balance of payments?

Answer 10

• The balance of payments is a record of all financial transactions made between consumers, firms and the government from one country with other countries.
• It states how much is spent on imports, and what the value of exports is.

Question 11

What are exports?

Answer 11

• Exports are goods and services sold to foreign countries
• they are POSITIVE in the balance of payments.
• This is because they are an inflow of money.

Question 12

What are imports?

Answer 12

• Imports are goods and services bought from foreign countries,
• they are NEGATIVE on the balance of payments.
• They are an outflow of money.

Question 13

What is the balance of payments made up of?

Answer 13

• The current account
• The capital account
• The financial account

Question 14

What is the current account on the balance of payments?

Answer 14

• The current account on the balance of payments is the balance of trade in goods and services.