Measures of economic performance

• Economic growth


  Increase in the potential output of an economy or in the real value of goods & services produced, measured by the % change in real GDP
• Gross domestic product (GDP)


  Measures the value of real output of the economy over a period of time; a rise in GDP indicates economic growth
• Nominal GDP


  The monetary value of all goods and services produced in the economy
• Real GDP


  The nominal value of GDP adjusted for inflation (GDP at constant prices)
• Real GDP per capita


  National income per person often used as a measure for the standard of living
• Value


  What goods and services are worth
• Volume


  The number of goods and services produced
• Purchasing Power Parity (PPP)

  Used when assessing relative living standards between countries
• Calculating Purchasing Power Parity (PPP)

  1. Comparing the price of a basket of comparable goods and services in different countries

  2. Measures the total amount of goods and services that a single unit of a country's currency can buy in another country
• Short run economic growth

  Movement from inside PPF1 on to PPF1; unemployed resources are used up to meet increase in aggregate demand
• Long run economic growth

  Shift from PPF1 to PPF2; increase in productive potential of economy; caused by increase in quantity and/or quality of resources or a technological advance
• PPF diagram


  • PPF1
  • PPF2