Understanding GDP data

Question 1

Actual growth

Answer 1

Measured by the % rate of GDP growth in a time period

Question 2

GDP

Answer 2

A measure of economic activities carried out in a domestic economy over a period of time (usually one year or a quarter)

• Expenditure C+I+G+(X-M)
• Factor incomes job incomes + profits + rent
• Value of output

Question 3

Nominal value

Answer 3

Based on current prices, ignores inflation

• Overstates the growth of an economic variable over time

Question 4

Real value

Answer 4

Adjusted for inflation

Question 5

Index number

x2 good
x1 bad

Answer 5

(new raw number / base index number)* 100

• Allows for easier comparison
• Can see trends with more facility
• Unrepresentative base year may distort figures

Question 6

Potential growth

Answer 6

Expansion of the productive capacity of an economy in the long run