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QLDEconomicsQuick questions
Unit 2: Modified markets
Quick questions on Macroeconomic measurement: GDP, CPI and unemployment (QCE Economics Unit 2)
14short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is real GDP?Show answer
Gross Domestic Product (GDP) is the total market value of all final goods and services produced within a country in a given period.
What is limitations of GDP?Show answer
GDP is the standard measure of economic activity but does not capture welfare comprehensively:
What is the Consumer Price Index?Show answer
The CPI measures the cost of a fixed basket of goods and services typically bought by metropolitan households. The ABS publishes quarterly (cat. no. 6401.0).
What is limitations of the CPI?Show answer
1. Substitution bias. Consumers substitute away from goods that have become relatively more expensive; the fixed-basket CPI overstates inflation by missing this. 2. Quality change. New product features may not be fully accounted for.
What is the unemployment rate?Show answer
Unemployment rate = number of unemployed people / labour force × 100.
What is limitations of the unemployment rate?Show answer
1. Excludes discouraged workers. People who have stopped looking are not counted as unemployed. The "hidden unemployment" estimate adds 1 to 2 percentage points. 2.
What is other macroeconomic measures?Show answer
Wage Price Index (ABS, cat. no. 6345.0). Quarterly. Controls for workforce composition.
What is using the indicators together?Show answer
The three core indicators (real GDP, CPI, unemployment) tell complementary stories:
What is participation rate?Show answer
Labour force as a percentage of the working-age population. Around 67 percent in 2024.
What is underemployment ratio?Show answer
Workers wanting more hours / employed.
What is confusing nominal with real GDP?Show answer
Use real GDP for growth comparisons.
What is treating CPI as a perfect measure?Show answer
It has substitution bias, quality bias, and excludes asset prices.
What is treating the unemployment rate as the only labour market measure?Show answer
Underemployment, participation and the underutilisation rate also matter.
What is forgetting per-capita measures?Show answer
Real GDP per capita is a better welfare measure than total real GDP.