Economics Completed Revision Checklist

Partially completed checklist of what you should be able to do, the checklist has been taken from Heinemann AQA AS Economics by Chris Vidler, Charles Smith. I have done the first 7 aims. Just a few notes. Any diagrams should be credited to Tutor2U.

Economic Indicators
Economic Cycle
Multiplier Effect
Circular Flow of Income

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  • Created on: 28-05-09 11:09
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Make a list of important economic indicators and explain what they indicate.
Gross Domestic Product
Gross Domestic Product measures the total value of all goods and services produced in an
economy in a given period of time in three wealth creating sectors, manufacturing, agriculture
and service industries. It is worked out by adding up the values of new goods/services that are
Nominal figures of GDP do not take into account inflation and are not a true measure of increased
output because any increased output could be made up of price changes.
Real GDP takes inflation into account and so tells us by how much the real output of the economy
has changed.
A change in real GDP indicates a change in economic growth.
Often misses out placing
values of unrecorded
economic activity such as
volunteer work. It also
does not distinguish
between activity which is
socially destructive, or
socially beneficial.
Gross Domestic Product
Per Capita
When GDP is divided by
the population, this is
called GDP per capita. It
is a better indicator of
the population's standard of living as it provides information as to how much individual can
spend. It indicates by how much the income of the average person has increased over time.
It does not express the quality of life experienced as it does not measure the environment, the
crime rate etc. It only provides an indication about living standards.
Economic Growth
Economic Growth rates are based on GDP and involved looking at percentage change in GDP over
time. It indicates whether the economy is expanding or contracting. A positive figure indicates a
growing economy. A negative figure indicates that the economy is contracting.
Inflation (RPI & CPI)
Inflation is the persistent rise of prices of goods/services over a period of time measured by a
Consumer Price Index: official measure of inflation used by governments. The basket of goods (
Goods bought by the typical household) does not include changes in house prices which is why
many people consider the RPI to be a better guide to inflation.
Retail Price Index: measures the monthly change in prices of goods/services consumed by typical
households. It is used to measure the rate of inflation over the year.

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Index Numbers: make it easier to make yearly comparisons. E.G a base year of 2000 is given,
and given a value of 100. If by 2005 the prices have risen by 3%, then the index given to that
year is 103.
Unemployment is a key measure of economic performance as it can affect everyone in society.
Unemployment is associated with a lower standard of living. The government uses 2 measures of
unemployment.…read more

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Households can be seen as individuals who own factors of production such as labour.
Firms are those who make use of the factors of production to produce goods and services.
Households provide the factors needed to produce goods and services, but they also flow income
into firms through consumer spending on these goods.
Firms provide the goods and also the payment for the factors of production.
It cannot be assumed, however, that households spend all of their income on consumer goods and
services.…read more

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Explain why income=output=expenditure.
Income is received as a return from firms to households in the form of wages, interest, profits
and rent. It is assumed that households will spend this income on consumer goods and services
and as a response to this demand, firms will produce output. In order to do so, firms will have to
spend more on rent, wages etc: expenditure.
Explain how the circular flow of income can be in equilibrium.
Withdrawals: savings, taxation, spending on imports.
Injections: Government spending, investment, exports.…read more


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