National Income Accounting
Measuring Economic Activity and Illustrating Its Variations
AO2·AO4·Diagram required
Syllabus requirement
Measures total economic activity using national income accounting methods and the circular flow model.
Assessment objectives
AO2 Application and AnalysisAO4 Use of Appropriate Skills
Required diagram: Circular flow of income diagram showing households and firms, factor and product markets, leakages (taxes, savings, imports), and injections (investment, government spending, exports).
Summary
This topic explains national income accounting and how it measures a country's level of economic activity. It describes the main macroeconomic objectives — steady economic growth, low unemployment, price stability (low inflation), and (for HL) a sustainable government debt — and states that national income is the money value of all goods and services produced in a country over a year. Understanding national income accounting is essential for evaluating policy performance and comparing economic activity over time.