Theme 2

Question 1

GDP

Answer 1

The total value of goods and services produced in an economy over a
period of time.

Question 2

Economic growth

Answer 2

The rate of increase of actual real GDP or an increase in the
productive capacity of the economy.

Question 3

GNI

Answer 3

GDP + net income earned abroad

Question 4

Nominal values

Answer 4

The value of an economic variable based on current prices - prices
today, which takes no account of changing prices over

Question 5

Purchasing power Parity

Answer 5

Adjusting GDP or other variables to reflect how much the local
currency actually buys you, or the purchasing power of the country.

Question 6

subjective well-being

Answer 6

How happy or content people feel, based on your own personal

judgment.

Question 7

GNH

Answer 7

An alternative to measuring GDP. It reflect the quality of life or non-
monetary (money-based) measures of the well-being of society.

Question 8

Inflation

Answer 8

A rise in the overall or average price level. Calculated as the % change
in the CPl or RPI over a year. Target of 2% per year.

Question 9

Deflation

Answer 9

When the overall price level falls instead of rises.
today, which takes no account of changing prices over time.
expressed as a negative inflation number, e.g.-2%

Question 10

Disinflation

Answer 10

When the rate of inflation falls - but it is still positive. Prices are still rising, but at a slower rate.

Question 11

CPI

Answer 11

A measure of the average level or prices in the UK, based on a representative basket used by the Government and Bank of England

Question 12

Household consumption expenditure survey

Answer 12

The first survey you need to calculate CPI inflation. You need a ‘representative basket of goods and services’. Government does a survey of nearly 7000 households’ spending habits.

Question 13

Weighting

Answer 13

Goods or services that people spend a lot or their money on will have
a higher weighting eg Electricity bills and housing costs will have a large weighting

Question 14

demand pull inflation

Answer 14

Inflation that is caused by a rise in Aggregate Demand. People are
spending more and firms might not be able to increase production
quickly enough (‘Bottlenecks’).

Question 15

Cost push

Answer 15

Inflation caused by rising costs. Higher costs will make it harder for
firms to produce. Costs could get passed on to consumers as higher
prices, so inflation rises.