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Questions and Answers
What is the term for the long-term movement or pattern in economic data?
What is the percentage increase in real gross domestic product over a period of time?
What is the state of being jobless and actively seeking work?
What is the rate at which the general level of prices for goods and services is rising?
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What is the term for wages adjusted for inflation, reflecting the purchasing power of income?
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What is a measure of a country's gross domestic product that has been adjusted for inflation?
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What is the measurement of the prices of around 1000 commonly used goods and services?
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How do households influence the CPI?
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What are the three main indicators of economic performance, as listed by the Reserve Bank of Australia?
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What does the inflation rate measure?
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What is the formula to calculate the growth rate of GDP?
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What does GDP per capita measure?
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What are some limitations of GDP as an economic indicator?
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Why is the unemployment rate important to individuals?
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Why is the unemployment rate important to businesses?
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What is the significance of the three indicators of economic performance?
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Study Notes
Indicators of Economic Performance
Trend
- A general direction in which something is devolving or changing over time
- Often referred to as the long-term movement or pattern in data such as GDP growth or unemployment rates
Economic Growth
- Increase in the production of goods and services in an economy over a period of time
- Measured as the percentage increase in real gross domestic product
Unemployment
- State of being jobless and actively seeking for work
- Unemployment rate: (Unemployed ÷ Labour Force) x 100
Inflation
- Rate at which general level of prices for goods and services is rising
- Measured by the consumer price index (CPI)
Real Wages
- Wages adjusted for inflation, reflecting the purchasing power of income
- Indicates how much goods and services can be bought with earned wages
Real GDP
- Measure of a country's gross domestic product that has been adjusted for inflation
- Takes inflation into account when comparing performance over time
Consumer Price Index (CPI)
- Measurement of prices of around 1000 commonly used goods and services
- Shows overall changes in prices
- CPI basket is chosen based on household spending habits
Measuring Economic Performance
- Three main indicators of economic performance:
- Gross domestic product
- Unemployment rate
- Inflation rate
Gross Domestic Product (GDP)
- Measures the total value of all goods and services produced within a country's border in a specific time period
- GDP calculation: (GDP 2 - GDP 1) / GDP 1 x 100 = Rate (%) of EG
GDP Per Capita
- Measures the average economic output per person
- Calculated by dividing GDP by the total population
- Provides a per-person basis for understanding the standard of living in a country
Limitations of GDP as an Economic Indicator
- Does not account for:
- Caring for young or sick relatives, health, education
- Volunteer work
- Housework and maintaining a pleasant neighborhood
- Leisure time, quality of life
- Quality of the natural environment
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Description
Test your knowledge of key economic indicators, including trend, economic growth, and unemployment, and their importance in measuring economic performance.
