1 Economic growth

a) The rate of change of real Gross Domestic Product (GDP) as a measure of economic growth and living standards.

b) Gross National Income (GNI) as an alternative measure of national income.

c) The distinction between the following measures of GDP/GNI:

• real and nominal • total and per capita • value and volume.

d) Comparison of GDP/GNI rates of growth between countries and over time.

e) The concept of Purchasing Power Parities (PPPs) in making international comparisons of real GDP/GNI.

f) The distinction between positive economic growth rates and negative economic growth rates.

g) The concept of ‘recession’ as two consecutive quarters of negative economic growth.

h) The limitations of using GDP/GNI to compare living standards between countries and over time.

i) National happiness and wellbeing:

• indicators of national happiness and wellbeing • the relationship between real incomes and subjective happiness.

 

2 Inflation

a) The concepts of inflation, deflation and disinflation.

b) Calculating inflation using a consumer price index (CPI), including role of weighted basket of goods and services.

c) Limitations of the CPI as a measure of the rate of inflation.

d) The producer (wholesale) price index as an indicator of future trends in the rate of inflation.

e) Causes of inflation:

• demand-pull • cost-push • excessive growth of money supply.

f) Causes of deflation:

• falling aggregate demand (AD)

• increase in aggregate supply (AS)

• fall in the money supply.

g) Effects of inflation and deflation on:

• Consumers • the government • firms • workers • income distribution • investment • competitiveness • the current account of the balance of payments.

 

3 Employment and unemployment

a) How unemployment is measured, using the International Labour Organization (ILO) definition.

b) The causes of unemployment:

• frictional • seasonal • structural • demand deficiency • real wage inflexibility.

c) The effects of unemployment on:

• consumers • firms • workers • public finances • resource utilisation and production possibility frontier • society.

d) The distinction between unemployment and underemployment.

e) The significance of changes in rates of employment, unemployment and economic inactivity.

f) The significance of net migration for employment and unemployment.

 

4 Balance of payments

a) Components of the balance of payments, with particular reference to the current account.

b) The distinction between deficits and surpluses in the trade in goods and services balance.

c) The distinction between balance of payments deficits and surpluses on the current account.