Macroeconomics indicator

Question 1

Real GDP

Answer 1

Definition: Real GDP is the total value of all goods and services produced in an economy, adjusted for inflation.
Key Point: Reflects the true growth in national output by removing the effects of price changes.
Formula:
Real GDP Growth = Nominal GDP Growth − Inflation Rate
Example: If GDP grew by 4% and inflation was 2%, then Real GDP growth is 2%.

Nominal value is expressed in monetary terms i.e. in current prices.

Real value adjusted for inflation by judging figures against a base year.

Question 2

Real GDP per capita

Answer 2

Definition: Real GDP per capita is Real GDP divided by the population, measuring average output per person.
Key Point: Useful for comparing economic performance between countries.
Formula:
Real GDP per Capita = Real GDP ÷ Population
Example: Measures how much each person, on average, contributes to the economy.

Question 3

Consumer prices index and Retail prices Index (CPI/RPI):

Answer 3

CPI (Consumer Prices Index):
Measures inflation based on household spending from the Family Expenditure Survey.
Uses a basket of goods weighted by spending habits (e.g., petrol > tea).
Excludes housing costs (e.g., mortgage interest).
RPI (Retail Prices Index):
Like CPI but includes housing costs like mortgage interest and council tax.
Typically, higher than CPI.
Key Point:
CPI and RPI track inflation but differ in their treatment of housing costs.

Question 4

Measures of unemployment:

Answer 4

1. Claimant Count:
   Counts people claiming unemployment benefits (e.g., Job Seeker’s Allowance).
   Must prove they are actively seeking work.
2. ILO & Labour Force Survey (LFS):
   Based on a survey by the International Labour Organisation.
   Criteria:
   Out of work for 4+ weeks.
   Ready to start within 2 weeks.
   Available for 1 hour of work per week (includes part-time unemployment).
   Key Point:
   LFS generally reports higher unemployment than the Claimant Count since it includes part-time unemployment.

Question 5

Measures of productivity

Answer 5

Definition: Productivity is the output per worker over a period.
Key Point: Measures efficiency—more output with fewer inputs means higher productivity.
Example:
Labour productivity is often measured as output per hour.
In Q1 2015, UK labour productivity grew by 0.3%.
Formula:
Productivity = Total Output ÷ Total Input (e.g., hours worked)

Question 6

Balance of payments on current account:

Answer 6

Definition: A record of all financial transactions between a country and others, showing imports and exports.

Key Concepts:
Exports = money inflow (positive).
Imports = money outflow (negative).
Components:
Current account (AS focus): Balance of trade in goods & services.
Capital account
Official financing account
Key Point: The current account tracks the trade of goods and services with other countries.

Question 7

Calculating GDP

Answer 7

National Expenditure: consumption + investment + government spending + net exports​

National Income: adding up all an economy’s incomes (wages, interest, profits and rent)​

National Output: the value of output from each of the main economic sectors​

Question 8

Converting from nominal to real terms:

Answer 8

Real value = index of comparison period (usually base year) divided by index of current period
Multiplied by nominal value

Data could be expressed as “GDP at constant 2005 prices”. This means that real GDP is being shown and that the comparison period is 2005