Section 8 - Measuring Economic Performance

Question 1

What are the 4 macroeconomic indicators?

Answer 1

Economic Growth
Inflation
Unemployment
Balance of Payments

Question 2

What is the rate of Economic Growth?

Answer 2

The change in GDP over a period of time

Question 3

What is a recession?

Answer 3

Negative economic growth for two consecutive quarters

Question 4

How do you measure Economic Growth?

Answer 4

(Change in GDP/ Original GDP) x 100% = percentage change

Question 5

What is Nominal GDP?

Answer 5

A GDP figure that hasn’t been adjusted for inflation

Question 6

How to measure standard of living of a country?

Answer 6

Total GDP/ Population size = GDP per capita

Question 7

Limitations to using GDP as a comparison to other countries (including living standards)

Answer 7

• Comparing living standards in countries that use different currencies, the exchange rate might not reflect the true worth of the two currencies.
• The extent of the hidden economy
• Public spending. Some governments provide more benefits
• The extent of income inequality
• Other differences in SoL e.g. working conditions, level of damage to environment and different spending needs.

Question 8

What is Inflation?

Answer 8

The sustained rise in the average price of goods and services over a period of time.
OR
A fall in the value of money.

Question 9

What is the difference between disinflation and deflation?

Answer 9

Disinflation = when prices rise more slowly
Deflation = when average prices fall

Question 10

What are the two measurements used for inflation?

Answer 10

Retail price index + Consumer price index

Question 11

What is the difference between RPI and CPI?

Answer 11

RPI measures the price of a basket of goods and services annually to measure inflation. CPI is measured similarly however excludes mortgage interest payments and council tax and larger sample is used.

Question 12

Limitations to CPI and RPI

Answer 12

RPI excludes all households in the top 4% of incomes.
Info given by households for the baskets can be inaccurate.
Only change once a year so might miss short-term changes in spending

Question 13

What is unemployment?

Answer 13

the LEVEL of UE is the no. of people who are looking for a job but cannot find one.
The RATE of UE is the no. of people out of work as a % of the labour force.