(1) Chapter 6 - The measurement of macroeconomy performance Flashcards

1
Q

What is MACROECONOMICS

A

The study of the whole economy at the aggregate level

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2
Q

What is a POLICY OBJECTIVE

A

A target that policy-makers wish to achieve

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3
Q

What are the main policy objectives

A
  • Full employment/ low unemployment
  • Economic growth and to improve standards of living
  • Control inflation, price stability
  • Satisfactory balance of payments
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4
Q

Define SHORT-RUN ECONOMIC GROWTH

A

Growth of real output from using idle resources

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5
Q

Define LONG-RUN ECONOMIC GROWTH

A

Increase in the economy’s potential level of output, outward shift of the economy’s PPF

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6
Q

What is GROSS DOMESTIC PRODUCT

A

The sum of all goods and services produced in the economy over a period of time

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7
Q

Define REAL GDP

A

The measure of all goods and services produced in an economy, adjusted for inflation

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8
Q

Define NOMINAL GDP

A

GDP measured at the current market prices, without removing the effects of inflation

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9
Q

What is the difference between REAL and NOMINAL GDP

A

Real GDP takes account of prices changes (inflation) whereas nominal does not

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10
Q

Define RECESSION

A

A fall in real GDP for 6 months or more

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11
Q

How much in % is FULL EMPLOYMENT

A

3% or less of the labour force

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12
Q

What is the CLAIMANT COUNT

A

A method of measuring unemployment from the people claiming unemployment benefits

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13
Q

What is the LABOUR FORCE SURVEY

A

A quarterly sample of households in the UK

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14
Q

Define INFLATION

A

Continuing rise in the average price level

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15
Q

Define DEFLATION

A

Continuing fall in the average price level

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16
Q

Define DISINFLATION

A

The rate of inflation is falling but still positive

17
Q

What is the PRICE INDEX

A

An index number showing the extent to which a price (basket of prices) have changed over a period of time

18
Q

What is the CONSUMER PRICES INDEX (CPI)

A

A measure of inflation. The average price increase of a basket of 700 different goods and services

19
Q

What is the RETAIL PRICES INDEX (RPI)

A

Older way of measure inflation

20
Q

Define INDEXATION

A

The automatic adjustment of items such as pensions to changes in price level through the use of a price index

21
Q

Define BALANCE OF PAYMENTS

A

A record of all the currency flows into and out of a country

22
Q

Define EXPORTS

A

Goods/services sold to other countries

23
Q

Define IMPORTS

A

Goods/services bought from other countries

24
Q

Define BALANCE OF TRADE

A

The difference between the money value of a country’s imports and its exports

25
What is a BALANCE OF TRADE DEFICIT
Imports > Exports
26
What is a BALANCE OF TRADE SURPLUS
Imports < Exports
27
What is a BALANCED BUDGET
When government spending equals government revenue (tax)
28
What is a BUDGET DEFICIT
When government spending is greater than the revenue
29
What is a POLICY CONFLICT
When two policy objectives cannot both be met at the same time
30
What are examples of POLICY CONFLICTS
Full employment and economic growth vs satisfactory of balance of payments Full E and EG vs control of inflation EG vs greater income equality Current living standards vs future living standards
31
What is a PERFORMANCE INDICATOR
Provides information for judging the success/failure of a government policy
32
What are the main beliefs of Keynesian economists
Governments should manage the economy, mainly through fiscal policies, encouraging investment
33
What are the main beliefs of pro-free market economists
Dislike government intervention in the economy, believing free markets provide incentives to work harder
34
What are INDEX NUMBERS
A number used to simplify the changes of price making it easier to see the proportion of the changes. The base year is typically 100