Measures of Economic Performance

  • Created by: April15
  • Created on: 18-02-20 19:23
  • Microeconomics is the study of individual markets within an economy while macroeconomics is the study of the economy as a whole.
  • Gross domestic product (GDP) is a measure of output that is used to compare with other countries and over time.
  • A 5% increase in GDP  in 1 year means that the output of the economy has increased by 5% over a 12-month period 
  • Depression/Recession are periods of time when the economy is performing badly (e.g. The Great Depression after WW1). A "boom" is a period when the economy is doing well with economic growth above its long run average. 
  • High unemployment is an indicator of poor national performance 
  • Inflation - It is the increase in average prices in an economy. 
  • High inflation decreases the value of savings as prices are higher. Knowledge of prices in the market are disrupted as prices are rising. Consumers do not know what is a reasonable price for a product 
  • Deflation makes it difficult for a country to grow its GDP as prices are falling 
  • When exports of goods and services are greater than imports there is a current account surplus
  • When imports of goods and services are greater than exports there is a current account deficit

Key measures of economic performance in macroeconomics:

  • Economic growth – real GDP growth.
  • Inflation – e.g. target CPI inflation of 2%
  • Unemployment – target of full employment
  • Current account – satisfactory current account, e.g. low deficit.

  • Economic growth will always be a very important measure of economic activity.
  • Real wages, labour productivity and investment are closely related as they affect real GDP and vice versa.
  • Economic growth is usually considered to be the


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