3.1 Measuring economic activity and illustrating its variationsSyllabusFirst assessment 2022Topic3.1Level—
What you’ll learn5 learning objectivesChoose one objective for a focused lesson, or study the complete topic.3.1.1National income accounting• National income accounting measures economic activity• Income, output, and expenditure approaches are equivalent in the circular flow model• Diagram: circular flow of income showing decision-makers, leakages, and injectionsSyllabus objective3.1.2GDP and GNI• Nominal GDP measures national output within a country• Nominal GNI adjusts GDP for net income flows with the rest of the world• Calculation: nominal GDP using the expenditure approach• Calculation: nominal GNI from dataSyllabus objective3.1.3Real and per capita measures• Real GDP and real GNI adjust for price changes• Per capita measures divide real GDP or real GNI by population• Purchasing power parity (PPP) adjusted measures improve international comparisons• Calculation: real GDP and real GNI using a price deflator• Calculation: real GDP per capita and real GNI per capitaSyllabus objective3.1.4Business cycle• The business cycle shows short-term fluctuations around a long-term growth trend or potential output• Diagram: business cycle with short-term fluctuations and long-term growth trendSyllabus objective3.1.5GDP, GNI, and well-being• GDP and GNI statistics have limits when measuring economic well-being• National income data can be used for comparisons over time and between countries• Alternative well-being measures include the OECD Better Life Index, Happiness Index, and Happy Planet IndexSyllabus objective