Edexcel Economics Theme 2 Questions & Correct Answers/ Graded A+

GDP : Gross domestic product measures the value of goods and services produced in an economy, it also measures national income/national expenditure Nominal GDP : Measures the monetary value of GDP (this may include the effects of inflation) Real GDP : Measures GDP adjusted for the effects of inflation, it measures the actual purchasing power of consumers in an economy GDP per capita : Is the level of GDP divided by population The volume of goods and services : Is the quantity produced 2 The value of goods and services : Is the quantity x price Economic growth : An increase in real GDP, referring to an increase in the total value of goods and services produced in an economy The rate of economic growth : Measures the annual percentage change in real GDP GNP : Gross national product is equal to GDP + net property income from abroad GNI : Gross national income measures the value of the services and products a country produces in an economy, it also includes interest payments and dividends from citizens living in other countries Purchasing power parity : PPP exchange rates can be used to measure the relative cost of a typical basket of goods and services in different countries and thus the relative spending power of people in different countries give their incomes 3 Inflation : A sustained increase in general price level Deflation : A decrease in the general price level of goods and services in an economy Disinflation : There is a falling inflation rate, prices are increasing at a slower rate Demand-pull inflation : Inflation due to excess demand