Flashcard Definition
The value of a currency in terms of the number of goods or services that one unit can buy. If the number of goods that £1 decreases over a yearly period, then the purchasing power has decreased.
Block Type
Flashcard
The Fraser of Allander have a handy GDP guide to understand this concept in more detail.
The most common measure of economic activity in a given geographical area (city, region, country, or even the entire world) is its Gross Domestic Product (GDP).
GDP measures the value of activity within an economy in a given timeframe. There are three approaches to measure this:
- Output approach;
- Expenditure approach; and,
- Income approach
In theory, the three approaches to measurement should lead to the same answer, giving us GDP.