Measures of Economic Performance

What Measures of Economic Performance covers

Covers the four numbers by which an economy is judged: growth, inflation, unemployment and the current account, how each is measured, what the measures miss, and what causes and follows from each.

The 12 subtopics

Each one has its own page.

• Measuring growth: real GDP, GDP per capita and GNIRecall questions on real against nominal GDP, total GDP and GDP per capita, value and volume measures, GNI, comparing growth rates between countries and over time, and converting nominal figures into real terms with the GDP deflator.Open →
• Purchasing power parity and the limitations of GDPRecall questions on why PPP-adjusted figures compare living standards better, and on what GDP leaves out.Open →
• National wellbeing and the Easterlin paradoxRecall questions on the measures the UK uses beyond GDP, subjective happiness, and what the Easterlin paradox implies for policy.Open →
• Inflation, deflation and how the CPI measures themRecall questions on inflation, deflation and disinflation, how the CPI basket and weights work, calculating the rate of inflation, and the difference between a percentage point change and a percentage change.Open →
• The limitations of the CPI, and the RPIRecall questions on what the CPI misses, and on how the RPI differs in coverage and in the formula it uses.Open →
• Demand-pull, cost-push and monetary causes of inflationRecall questions on demand-pull and cost-push inflation, the sources of each, and the monetarist account.Open →
• The effects of inflationRecall questions on what inflation does to consumers, savers, borrowers, firms, workers and the government, and on the wage-price spiral.Open →
• Measuring employment, unemployment and inactivityRecall questions on the claimant count and the ILO measure applied through the Labour Force Survey, unemployment against under-employment, the employment, unemployment and inactivity rates, and why seasonally adjusted figures are used and where they fall short.Open →
• The causes of unemployment, migration and skillsRecall questions on structural, frictional, seasonal and cyclical unemployment, real wage inflexibility, and the part played by migration and skills.Open →
• The effects of unemploymentRecall questions on what unemployment does to consumers, firms, workers, the government and wider society, and on hysteresis.Open →
• The components of the current accountRecall questions on trade in goods and services, primary and secondary income, and what falls under each.Open →
• Current account deficits, surpluses and global imbalancesRecall questions on how a deficit is financed, why persistent deficits matter, and how growth, inflation and the exchange rate move the balance.Open →

What you need to know

Answer each one before you reveal it.

Take Measures of Economic Performance further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Nominal GDP vs Real GDP

  Nominal GDP: national output measured at current prices. Real GDP: national output adjusted for price changes.

Questions from this topic

Each one with the model answer underneath.

1. 1

   How is economic growth measured?

   Model answer

   Economic growth is measured by the rate of change of real Gross Domestic Product (GDP) over a period of time.

2. 2

   What is the key difference between real GDP and nominal GDP?

   Model answer

   Real GDP adjusts for inflation by measuring output at constant prices, while nominal GDP measures output at current prices without adjusting for inflation.

3. 3

   Why is real GDP preferred over nominal GDP when measuring economic growth?

   Model answer

   Real GDP removes the effect of price changes, allowing for accurate comparison of actual output levels over time, whereas nominal GDP changes could reflect inflation rather than genuine increases in production.

4. 4

   What distinguishes total GDP from GDP per capita?

   Model answer

   Total GDP measures the aggregate output of an economy, while GDP per capita divides total GDP by the population to give output per person.

5. 5

   Why might GDP per capita be a more useful indicator than total GDP when comparing living standards?

   Model answer

   GDP per capita accounts for population size, giving a measure of average output per person, which better reflects the typical standard of living than the total size of the economy.

6. 6

   State the formula for calculating GDP per capita.

   Model answer

   GDP per capita = Total GDP ÷ Population

What is inside Levo

Six ways to work the same material.

Measures of Economic Performance revision questions

What does Measures of Economic Performance cover in Edexcel A-Level Economics A?

12 subtopics: measuring growth: real gdp, gdp per capita and gni, purchasing power parity and the limitations of gdp, national wellbeing and the easterlin paradox, inflation, deflation and how the cpi measures them, the limitations of the cpi, and the rpi, demand-pull, cost-push and monetary causes of inflation, the effects of inflation, measuring employment, unemployment and inactivity, the causes of unemployment, migration and skills, the effects of unemployment, the components of the current account and current account deficits, surpluses and global imbalances. Each one has its own page with questions and model answers.

How is Measures of Economic Performance organised?

By the Edexcel 9EC0 specification, subtopic by subtopic, so it matches the order you are taught it in.