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5
10/200 × 100 = 5.
O Level · English Medium · Cambridge · Economics
National income, prices and employment
Interpret output, inflation and unemployment without mixing levels and changes.
Shared cross-level core and stretch unit. Start with the core questions, then use the stretch example for deeper work. The same unit is available in related class and board pathways; it is not a full grade-specific or examination-specification course. A teacher should select the appropriate depth and further topics.
Learn the idea
Real output adjusts a money measure for price changes; nominal output does not. Inflation is a rate of change in a price index, not the price level itself. Unemployment rates depend on the definition of the labour force. A lower inflation rate can still mean prices are rising.
Worked example
A price index rising from 100 to 108 shows an 8% increase for its basket and method. If the next rise is from 108 to 112.32, inflation for that interval is 4%; prices are still higher, not falling.
- Define the measure and reference period.
- Calculate change using the original base.
- Explain who and what the measure covers.
Stretch example
With base-year prices, real GDP values quantities consistently across periods. GDP is output measured within an economy; it does not by itself describe wellbeing, distribution or environmental costs.
Your written practice
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no
Prices still rise in both periods under the stated positive rates.
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10
20/200 × 100 = 10.
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If prices rise faster than income, that income buys less.
Compare growth in income and prices.
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Families buy different baskets and face different local prices.
Explain the weighting limitation.
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80
120/1.5 = 80.
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An average can rise while gains are unevenly distributed, and wellbeing includes factors outside GDP.
Explain both distribution and scope.
Read an indicator
Explain a fictional inflation or unemployment table in four sentences.
Review with a guardian or teacher
- Define the indicator.
- Show the denominator and period.
- State one limitation and avoid a personal forecast.
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