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The Measurement of Macroeconomic Performance
A country's GDP measures total value of output in a year within that country. In theory,
economic growth measures the increase in productive capacity of an economy, as shown by
PPF. Can't be measured precisely so % change in GDP over a period of time (usually a year)
used the measure economic growth.
Output is measured in monetary terms. Nominal GDP measures the value of GDP at that
year's price level. This doesn't give an accurate figure as if prices rise by 5% and GDP rises by
5% the value of goods and services has stayed the same. So we use real GDP, which is
nominal GDP adjusted to eliminate changes caused by price changes (inflation).
There is no official target for economic growth, but historically it has averaged at around
2.5% per annum. Economic growth in the 12 months to October 2012 was -0.1%.
Measures the rate at which prices are increasing. Monthly survey records changes in prices
paid by consumers for representative cross-sections of goods and services. If average price
of these products rises, there is inflation. If prices fall, there is deflation.
Two separate measures of inflation used in the UK:
RPI (Retail Prices Index) - based on a representative cross-section of products
purchased by a typical UK household. In October 2012 RPI inflation was 2.6%.
CPI (Consumer Prices Index) - more closely comparable to measures used
throughout the EU. Excludes costs associated with home ownership. In October
2012 CPI inflation was 2.2%
The government's target is to have CPI inflation at 2% per annum.
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Can be measured as a number or as a % of the working population.
Two separate measures of unemployment are used in the UK:
The Claimant count (main measure until 1997), measures the number of people
claiming Job Seekers Allowance (JSA). In October 2012 this was 4.8%.
The International Labour Office (ILO) measure (the official measure since 1998),
which includes people who may be seeking work but who are not entitled to
Jobseeker's Allowance. In October 2012 this was 7.9%.…read more