Question 1. Case Study GDP measures the national income of a country over a period of time. As an indicator of the standard of living a government might want to use a real GDP per capita. This shows the purchasing power per person in the economy can be measured over time. this is a common target for governments because it is a measure of the financial welfare of their citizens. However, it may have limitations such as: it does not show the distribution of income and it does not reflect the quality of goods and services. Growth may have adverse environmental effects and higher incomes may be at the expense of quality of life e.g., it may be achieved through working more hours recently governments have considered alternatives targets such as happiness; focusing on what makes people happy which may not necessarily be more income. Aggregate demand measures the planed expenditures on final goods and services. It comprises: C+I+G+X-M (consumption plus investment plus government expenditures plus export revenue minus import spending). Whereas, Consumption measures the spending by households on final goods and services. This is important element of aggregate demand.

1.1 Explain limitation mentioned in above case

1.2 Distinguish between GDP and per capita GDP

1.3 Explain all components of aggregate demand

1.4 Identify the common targets of Government from the above case