Government and the Macroeconomy · 2 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 6% of your exam marks.
New emphasis in the 2027 syllabus; economic growth and recession are now a distinct topic, including causes and consequences of recession. Guidance based on specimen materials.
Economic growth is measured by the change in from one year to the next, expressed as a percentage.
Using real GDP matters. If a country's output is valued at current prices and prices rose by 5%, the figures would show growth even if the economy produced exactly the same goods. Adjusting for inflation gives real GDP, which reflects actual output.
A related figure is real , which is real GDP divided by the population. This is mainly an indicator of living standards rather than a measure of growth itself: it shows the average output (and roughly the average income) per person. If a country's real GDP rises by 2% but its population rises by 3%, then GDP per head has actually fallen, and the average person is worse off even though the economy as a whole has grown. So when an examiner asks how economic growth is measured, the answer is real GDP; GDP per head answers a different question, about how living standards are changing.
How economic growth is measured (2 marks)
What comes up: a 2-mark question asking how economic growth is measured.
Write (two marks): (1) it is measured using real GDP (1) (2) the change in a country's total output / national income / expenditure in real terms over time (1).
Watch out: the mark scheme does not accept "GDP per head" as the answer to how growth is measured, because GDP per head is an indicator of living standards. You must say real GDP; "GDP" without "real" risks describing inflation rather than growth.