What did economists predict would happen in

2011? What actually happened?

What has happened to interest rates in 2011?
What has happened in the US over 2011?
Why are China & India are growing so fast?
What are the disadvantages of growing so fast?
What macroeconomic policies is the Coalition
using to try to boost economic growth?



Individual research
Everything you need to know about national income
and economic growth

What is national income?
What is the most common measure of national income?
There are 3 ways to calculate GDP. Define them
What do national income, national expenditure and national output
all have in common?
What is the difference between nominal GDP and real GDP?
What is the difference between total GDP and real GDP?
What is economic growth?
What is the difference between actual economic growth and
potential economic growth?
What is an output gap?


20
What is national income?
The level of total output in an economy.

What is the most common measure of national income?
Gross domestic product (GDP)
GDP is measures the value of output produced within the
domestic boundaries of the UK over a given time period

There are 3 ways to calculate GDP. Define them.





National
Output
The total value of goods and services produced by firms
National
Expenditure
Total amount of spending on goods and services in the
economy: GDP = C+ I + G + (I X)
National
Income
The total amount earned by households for producing goods
and services. What does this calculation exclude?
What do national income, national expenditure and national output all
have in common?
They are equal


What is the difference between nominal GDP and real GDP?
Real GDP (aka GDP at constant prices) measures total output at one
years prices. This removes the effects of inflation from GDP
calculations. An increase in real GDP means that the economy is
experiencing positive growth.
Nominal GPD measures total output at current prices. The economy
only grows when an increase in nominal GDP is greater than the rate
of inflation.

What is the difference between total GDP and GDP per capita?
Total GDP is calculated by adding up the value of all of the output
produced within the domestic boundaries of the UK.
GDP per capita = Total GDP / number of citizens
What is economic growth?
A rise in the output of goods and services (GDP) over time
The rate of increase in GDP, in real terms, over a given
period of time
It can result from increases in actual GDP or potential GDP
(shift to the right of the production possibility frontier)

What is the difference between Actual and Potential
economic growth?
Actual growth - the increase in GDP, in real terms
Potential growth - the increase in the productive capacity
in a country


Shows the maximum or potential output of an economy
Moves outwards when the economy grows
Production possibility frontier
Where is there spare capacity? At what points is the economy at full capacity?
Explain 2 factors that will cause the PPF to shift outwards
5
What is an output gap?
Potential output Actual output
What is a positive output gap?
When the actual level of output (GDP) is
above the long term trend

What is a negative output gap?
When the actual level of output (GDP) is
below the long term trend
The Output Gap









1. Label (a) the long term growth line (b) peaks (c)troughs (d)
downturns (e ) recoveries
2. What does this graph tell you about trends in economic growth?
3. What happens to unemployment and inflation at each stage of
the business cycle?
5
Shifts in AD or AS should increase actual growth
except when equilibrium occurs when AD is
horizontal or AS is vertical. Can you illustrate this
on a diagram?