They measure GDP solely by counting the total quantity of goods produced in each country, since services and currency values are too difficult to compare across borders.

They calculate GDP in each country based on its own price levels, but then use a single, unchanging reference exchange rate (e.g., a fixed U.S. dollar rate from a chosen base year) to compare all countries.

They rely primarily on nominal GDP in local currencies, since adjusting for exchange rates introduces too many uncertainties about the real cost of living.

They choose a reference set of prices—often associated with a major currency like the U.S. dollar—and convert each country’s GDP either using market exchange rates or purchasing power parity (PPP) exchange rates

MPC is the ratio of total consumption to total income, representing the propensity to consume across all income levels.

If MPC is 0.8, households spend 8% of any additional income on consumption.

If MPC is 0.5 and a household’s income increases by $10,000, the consumption is expected to increase by $5,000.

MPC describes the size of the effect of one additional unit

of income on consumption.

The more generous income support for the

unemployed shifts the PS curve upwards.

Policies make it less costly to

fire workers mean that the consequences of

shirking on the job would be worse for the

employee, so the employer could reduce the wage and still expect the worker to

work up to standard. This would be a shift down in the WS curve.

An upward shift in the PS curve resulting from an increase in the productivity of labour.

An upward shift in the WS curve because workers have more positive feelings (or less negative feelings) towards their employer so that keeping the job becomes more valuable to them.

Segmentation of the labor market can increase income inequality, as workers with identical skill sets may earn significantly different wages depending on which segment they are employed in.

The primary labor market is characterized by short-term contracts, lower pay, and little job security, whereas the secondary labor market provides stable employment, high wages, and clear promotion pathways.

The secondary labor market typically offers less job security and lower wages compared to the primary labor market, even for workers with comparable skills.

Segmented labor markets eliminate income inequality by ensuring that all workers are paid equally for the same skill level and hours worked.