SECTION C
Chapter Definition Explanation
30 Macroeconomics The study of the economy as a whole.
Macroeconomic The aims of a government relating to key economic performance indicators such as economic growth, inflation
objectives and unemployment.
(MEPOs) These generally include:
● Inflation (price stability)
● Levels of employment
● Economic growth
● Protection of the environment
● Balance of payments (current account)
Microeconomics The study of individual parts of the economy.
Measuring economic The performance of a government is often reflected by how well it manages the economy.
performance Examples include :
● The level of unemployment
● The rate of inflation
● Total production
● Retail sales
● Bankruptcies
● Total income
● The value of goods sold abroad
● Stock market prices.
Economic Growth A government want the economy to grow. If so, living standards will improve. Growth in the economy is
measured by how much output grows, for example in GDP- gross domestic product.
This measures the total value of all goods and services produced in an economy over a period of time, usually
one year.
Output Output = Expenditure = Income
GDP - Gross This measures the total value of all goods and services produced in the economy over a period of time, usually
Domestic Product one year.
Inflation If the general price level is rising in an economy, inflation is said to exist. If prices (general price levels) become
too high for people to afford things, problems arise. It causes uncertainty as it complicates business
decision-making.
Uncertainty is likely to stunt growth so the government must aim to keep it low.
Unemployment Unemployment is a waste of resources, as people are not contributing output. So, GDP will be lower and
governments want to lower this number as much as possible.
The current account Most countries trade with other countries. Goods sold by countries are called exports and goods entering the
(Imports and country are called imports. The value of exports and imports must at least equal the number of imports,
exports) otherwise the country will go into debt. The government should therefore try to overall balance this number.
A benefit system People with disabilities and carers. The Disability and Carers Service, which is part of DfC, is responsible for
benefits and services for people who are sick or have a disability
Protecting the People around the world are becoming increasingly concerned about damage done to the environment. More
environment and more governments therefore try to conserve the environment to the best of their ability.
GDP per capita GDP per person.
31 Economic Growth The increase in national income over time.
It includes:
● Income from wages
● Profits
, ● Royalties
● Dividends
● Interest
● Income generated abroad
It is equal to the value of all spending in the economy. The most common measure is GDP.
Gross Domestic An internationally recognised measure of national income.
Product (GDP) It does have some limitations as a measure of growth, including:
Inflation Price increases can distort growth rates. Real inflation and nominal inflation both
differently measure this. We use real GDP which takes into account inflation.
Population changes Different populations have different total incomes. Hence, GDP per capita was
introduced.
The hidden economy Sometimes paid work goes unrecorded or no transaction is recorded.
Statistical errors Gathering the data needed to calculate national income is a huge task.
Unfortunately, errors are made because the data could be inaccurate.
GDP and living Just because GDP rises it does not automatically mean that living standards
standards have also risen. Other factors have to be taken into account such as the amount
of leisure time to accurately measure living standards.
As well as this, if GDP to rise, pollution (for example) might increase. This
means living standards might not necessarily increase.
The value of home Some goods and services are not traded and therefore economic activity is not
produced goods recorded.
National Income The value of income, output or expenditure over a period of time.
Total growth The actual value (in currency) that the economy’s worth had risen/fallen by.
Growth Rate The amount by which GDP increases each year.
Total growth and growth rate may not be the same because, over time, growth works in compound interest.
The economic cycle
Boom The peak of the economic cycle where GDP is growing at its fastest.
Demand will be rising, jobs will be created, wages will be rising and the profits made by
the firms will be rising. However, prices may also be rising.
Downturn A period in the economic cycle where GDP grows, but more slowly.
Demand for goods and services will flatten out or begin to fall, unemployment will start
to rise and wage increases will slow down. Many firms will stop expanding, profits may
fall and some firms will leave the market. Prices will rise more slowly.
Chapter Definition Explanation
30 Macroeconomics The study of the economy as a whole.
Macroeconomic The aims of a government relating to key economic performance indicators such as economic growth, inflation
objectives and unemployment.
(MEPOs) These generally include:
● Inflation (price stability)
● Levels of employment
● Economic growth
● Protection of the environment
● Balance of payments (current account)
Microeconomics The study of individual parts of the economy.
Measuring economic The performance of a government is often reflected by how well it manages the economy.
performance Examples include :
● The level of unemployment
● The rate of inflation
● Total production
● Retail sales
● Bankruptcies
● Total income
● The value of goods sold abroad
● Stock market prices.
Economic Growth A government want the economy to grow. If so, living standards will improve. Growth in the economy is
measured by how much output grows, for example in GDP- gross domestic product.
This measures the total value of all goods and services produced in an economy over a period of time, usually
one year.
Output Output = Expenditure = Income
GDP - Gross This measures the total value of all goods and services produced in the economy over a period of time, usually
Domestic Product one year.
Inflation If the general price level is rising in an economy, inflation is said to exist. If prices (general price levels) become
too high for people to afford things, problems arise. It causes uncertainty as it complicates business
decision-making.
Uncertainty is likely to stunt growth so the government must aim to keep it low.
Unemployment Unemployment is a waste of resources, as people are not contributing output. So, GDP will be lower and
governments want to lower this number as much as possible.
The current account Most countries trade with other countries. Goods sold by countries are called exports and goods entering the
(Imports and country are called imports. The value of exports and imports must at least equal the number of imports,
exports) otherwise the country will go into debt. The government should therefore try to overall balance this number.
A benefit system People with disabilities and carers. The Disability and Carers Service, which is part of DfC, is responsible for
benefits and services for people who are sick or have a disability
Protecting the People around the world are becoming increasingly concerned about damage done to the environment. More
environment and more governments therefore try to conserve the environment to the best of their ability.
GDP per capita GDP per person.
31 Economic Growth The increase in national income over time.
It includes:
● Income from wages
● Profits
, ● Royalties
● Dividends
● Interest
● Income generated abroad
It is equal to the value of all spending in the economy. The most common measure is GDP.
Gross Domestic An internationally recognised measure of national income.
Product (GDP) It does have some limitations as a measure of growth, including:
Inflation Price increases can distort growth rates. Real inflation and nominal inflation both
differently measure this. We use real GDP which takes into account inflation.
Population changes Different populations have different total incomes. Hence, GDP per capita was
introduced.
The hidden economy Sometimes paid work goes unrecorded or no transaction is recorded.
Statistical errors Gathering the data needed to calculate national income is a huge task.
Unfortunately, errors are made because the data could be inaccurate.
GDP and living Just because GDP rises it does not automatically mean that living standards
standards have also risen. Other factors have to be taken into account such as the amount
of leisure time to accurately measure living standards.
As well as this, if GDP to rise, pollution (for example) might increase. This
means living standards might not necessarily increase.
The value of home Some goods and services are not traded and therefore economic activity is not
produced goods recorded.
National Income The value of income, output or expenditure over a period of time.
Total growth The actual value (in currency) that the economy’s worth had risen/fallen by.
Growth Rate The amount by which GDP increases each year.
Total growth and growth rate may not be the same because, over time, growth works in compound interest.
The economic cycle
Boom The peak of the economic cycle where GDP is growing at its fastest.
Demand will be rising, jobs will be created, wages will be rising and the profits made by
the firms will be rising. However, prices may also be rising.
Downturn A period in the economic cycle where GDP grows, but more slowly.
Demand for goods and services will flatten out or begin to fall, unemployment will start
to rise and wage increases will slow down. Many firms will stop expanding, profits may
fall and some firms will leave the market. Prices will rise more slowly.
