Measures Of Economic Performance 2.1

GDP is the value of all goods/services produced in an economy in a one-year period.

Adds up the value of all the expenditure in the economy. This includes consumption, government spending, investment by firms and net exports.

Adds up the rewards for the factors of production used. This includes wages, rent, interest from capital and profit.

The actual value of all goods/services produced in an economy in a one-year period. There has been no adjustment for inflation.

The value of all goods/services produced in an economy in a one-year period - and adjusted for inflation

GDP / the population, it shows the mean wealth of each citizen in a country. This is useful to compare standards of living.

Measures the income earned by citizens operating outside of the country as well as the GDP

GDP and income from abroad sent by non-residents

A conversion factor that can be applied to GDP,GNI and GNP. It calculates the relative purchasing power of different currencies.

Quality of goods/services, does not measure inequality, does not measure unpaid/voluntary work, does not measure environmental factors affecting standard of living.

The sustained increase in the average price level of goods/services in an economy

Occurs when there is a fall in the average price level of goods/services in an economy

Occurs when the average price level is still rising, but at a lower rate than before

A 'household basket' of 700 goods/services that an average family would purchase is compiled on an annual basis.Each month, prices for these goods/services are gathered from 150 locations across the UK and is used to measure inflation.

Doesn't measure product quality changes, ignores regional differences, errors in data collection

The retail price index (RPI) is calculated in exactly the same way as the CPI. Certain goods/services that are excluded from the CPI are included with the RPI such council tax, mortgages etc.

Uncertainty due to rapid price changes, decrease in purchasing power, decrease in the real value of savings, fall in real income, higher wages.

Someone is considered to be unemployed if they are not working but actively seeking work.

Someone is underemployed when they want to work more hours than they currently work , or they are working in a job that requires lower skills than they have

Unemployment caused by a fall in AD in an economy which causes firms to lay off workers.

Unemployment cause by a mismatch between jobs and skills as the structure of an economy changes.

Occurs when workers are betwen jobs

Occurs when wages are inflexible at a point higher than the free-market equilibrium wage

A record of all the financial transactions that occur between a country and the rest of the world

All transactions related to goods/services along with payments related to the transfer of income

All transactions related to savings, investment and currency stabilisation (intervention from government to influence currency price)

Occurs when the value of the outflows is greater than the value of the inflows Usually occurs when the imports is higher value than exports.

Occurs when the value of the inflows is greater than the value of the outflows Usually occurs when imports is lower value than exports.