Candidates will consider national income as the most important measurement of macroeconomic performance and analyse its determination by the two main macroeconomic models: the circular flow of income, and Aggregate Demand and Aggregate Supply (AD/AS). The key concepts central to this work are:equilibrium and disequilibrium; time. Candidates will examine the measurement, causes and consequences of three key indicators of a country’s macroeconomic performance: economic growth, unemployment and price stability. These key concepts will provide useful contexts here: progress and development; equilibrium and disequilibrium.

4.1 National income statistics
4.1.1 meaning of national income
4.1.2 measurement of national income:• Gross Domestic Product (GDP)• Gross National Income (GNI)• Net National Income (NNI)
4.1.3 adjustment of measures from market prices to basic prices
4.1.4 adjustment of measures from gross values to net values
4.2 Introduction to the circular flow of income
4.2.1 circular flow of income in a closed economy and an open economy: the flow of income between households, firms and government and the international economy
4.2.2 injections and leakages (multiplier not required)
4.2.3 equilibrium and disequilibrium (marginal and average propensities not required)