Edexcel International A Level Economics
Edexcel International A Level Economics Measures of Economic Performance Exam Questions
Free Edexcel International A Level Economics exam questions for Measures of Economic Performance, with a mark scheme for every pack. Covers economic growth, GDP, inflation and price indices, unemployment measures, the balance of payments and measures of wellbeing.
Measures of Economic Performance exam questions
1 question pack of real past exam questions, each with its mark scheme. Do not stop after a few: answer as many as you can without notes, then mark every answer with the mark scheme. The more questions you do, the more quickly you will spot how examiners ask about each idea.
About Edexcel International A Level Economics Measures of Economic Performance
Measures of economic performance is the first topic of Unit 2 in Edexcel International A Level Economics. It shows how economists judge whether an economy is doing well, using real GDP, inflation, unemployment and the current account of the balance of payments. You need to understand how each is measured, their limitations, and how to interpret data in tables and charts, which is a major part of the exam. The topic also introduces measures of wellbeing beyond GDP. It forms the basis for the rest of Unit 2, where you analyse what causes changes in these indicators and how policy can influence them.
What you need to know
- Economic growth Measured by the percentage change in real GDP. Know nominal versus real values, GDP per capita, and the use of purchasing power parity (PPP) to compare countries.
- Inflation A sustained rise in the general price level. Consumer price indices are built using a weighted basket of goods based on household spending surveys. Know the causes (demand-pull and cost-push) and effects of inflation and deflation.
- Unemployment People who are actively seeking and available for work but have no job. Measured by surveys such as the ILO Labour Force Survey and by claimant counts. Types: frictional, structural, cyclical and seasonal.
- Balance of payments The current account includes trade in goods, trade in services, primary income and secondary income. A deficit means more is spent on imports than earned from exports and income flows.
- Wellbeing GDP has limits as a measure of living standards, so economists also consider measures of happiness and wellbeing, and indicators such as the Human Development Index.
Common mistakes in Measures of Economic Performance
- Thinking a fall in inflation means prices are falling. A fall in inflation from 5% to 2% means prices are still rising, just more slowly.
- Using nominal values to compare across years. Adjust for inflation to get real values.
- Adding index numbers as if they were values. Index numbers show percentage change relative to a base year of 100.
- Including capital flows in the current account. Investment flows such as FDI are in the financial account.
- Ignoring underemployment and hidden unemployment. Official figures may understate the true level of spare labour.
Try three Measures of Economic Performance exam-style questions
1. A price index rises from 120 to 126 over one year. Calculate the rate of inflation. (2 marks)
Show the mark scheme answer
Change = 6; inflation = (6 / 120) x 100 = 5%.
2. Explain two limitations of using GDP per capita to compare living standards between countries. (4 marks)
Show the mark scheme answer
Does not account for income distribution; excludes informal economy and non-market output; ignores environmental quality, leisure and life expectancy; exchange rate distortions unless PPP is used; two limitations explained.
3. Explain two costs of a high rate of inflation. (4 marks)
Show the mark scheme answer
Reduces purchasing power, especially for those on fixed incomes; erodes the real value of savings; reduces international competitiveness, worsening the current account; creates uncertainty that reduces investment; menu and shoe leather costs.
Measures of Economic Performance FAQs
What does Edexcel IAL Economics Measures of economic performance cover?
It covers economic growth and GDP, inflation and price indices, unemployment, the balance of payments and broader measures of wellbeing.
Which unit is Measures of economic performance examined in?
It is part of Unit 2, Macroeconomic performance and policy.
Which calculations do I need for Measures of economic performance?
Practise percentage changes, index numbers, converting nominal figures to real figures and GDP per capita. Read data labels carefully, especially whether figures are rates or levels.
