Macroeconomics: Measuring economic growth

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  • Created by: Jade
  • Created on: 13-12-12 10:17
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  • Measuring economic growth
    • Nominal GDP
      • Output measured in current prices and so not adjusted for inflation
    • Real GDP
      • GDP adjusted for inflation
      • =GDP figure x base year index/current year price index
    • Economic growth is usually measured by the annual percentage change in real GDP
    • Income method
      • Estimate total earnings by the amount of tax paid
        • Transfer payments are not included e.g. pensions and job seeker's allowance
    • Output method
      • Measure the value of what firms produce
        • Import ant to avoid double counting of raw materials and finished products
    • Expenditure method
      • Measure the amount that people spend by VAT
        • Important to include exports, exclude imports


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