Definitions

1. What is a growth rate?

• A growth rate is the rate of change in a variable from one period to another.

2. Name 2 Measures of Economic Performance

• Trade Surplus/Deficit
• Unemployment

3. Describe the GDP deflator.

• The GDP deflator shows how the cost of different bundles of goods would vary holding prices constant.
• The GDP deflator holds base period prices fixed while the CPI holds base period quantities fixed.

P = Current year prices * Current year quantities * 100
Base year prices * Current year quantities

4. Define Inflation.

• Inflation is the rate of change in the Consumer Price Index / representative bundle of goods.

5. Name 2 leakages from the circular flow.

• Imports
• Savings

6. How do we measure unemployment?

Amount of people unemployed * 100
Amount of people willing to work
(i.e. people b/w 15-64)