1. measures of economic performance Flashcards
GDP
the standard measure of output, which allows us to compare countries. it is the total value of goods and services produced by a country in a year
rates of GDP as a measure of growth
economic growth is the rate if change of output. typically measured by the percentage change in GDP per year
GDP per capita
total GDP divided by the population
real GDP
takes away affect of inflation
gross national income (GNI)
the values of goods and services produced by a country over time plus the net overseas interest payments and dividends
gross national product (GNP)
the value of goods and services over a period of time through labour or property produced by citizens
making comparisons about growth
-overtime: changing national income levels will show us if the country is growing or shrinking
-between countries: if countries have different populations, GDP per capita must be measured
Purchasing Power Parities
an exchange rate of one currency for another which compares how much a typical basket of goods in the country compares to another
problems of using GDP to compare standard of living
-inaccuracy if data (black markets, inflation, home produced goods)
-inequality (what if only one group grow and overall living standard are unchanged)
-quality of goods and services (living standards could be better than expected)
-comparing different currencies (ensure purchasing power parity is used)
-spending
factors of national happiness
-real GDP per capita
-health
-life expectancy
-freedom from corruption
-having someone to count on
-perceived freedom to make choices
-generosity
real incomes and subjective happiness
at low incomes, happiness and income are positively related. however at some point in higher incomes, income affects happiness less
inflation
the general increase in prices in the economy
deflation
the fall in prices which indicates a slowdown in the economy
disinflation
reduction in the rate of inflation
consumer price index
collection of prices of 710 goods and services from 20,000 shops in 141 locations and online sites. the prices are updates every month
how does the CPI measure inflation
all the prices pf the basket of goods are combines using information of the average household spending pattern to produce an overall index
limitations of CPI
-not all goods are measured so not totally representative
-does not include the price of housing
Retail Price Index
like the CPI but includes housing prices
causes of inflation
cost push
demand pull
increase in money supply
effects of inflation on consumers
-less money to spend
-those in debt find it easier to pay off
-people will feel less well off
effects of inflation on workers
-if incomes don’t rise, their welfare will fall
-deflation could lead to a loss of jobs
effects of inflation on firms
-less competitive to other nations if your goods are more expensive
measures of unemployment
-claimant count
-International labour organisation
-labour force survey
claimant count
number of people receiving benefits
labour force survey
sample of people living in households
international labour organisation
anyone over 16 can be classed as unemployed, employed or economically inactive
comparisons between the claimant count and LFS
-some people aren’t eligible for benefits but are unemployed so the LFS tends to be higher
-some people may fraudulently claim benefits
-both underestimate the figure (don’t include sick or disabled people, those on government training schemes or those working part time wanting to work full time)
employment rate
percentage of population of working age who are employed
unemployment rate
percentage if economically active people who are unemployed
underemployed people
-zerohour contracts or part timers
-those in ops that do not reflect their skill level
-increases during recessions
types of unemployment
-frictional (between jobs )
-structural (lack of demand)
-seasonal
-cyclical (lack of demand in country)
migration and skills
migration cause a rise in jobs as their spending should increase job demand, however they could also cause wages to fall
impacts of unemployment on the government
-fall in tax revenue
-budget deficit
impacts of unemployment on consumers
-less choice
-possibly lower prices
impacts of unemployment on workers
-low job security
-those who are unemployed see a loss of income
impacts of unemployment on firms
-can offer lower wages
-smaller pool of skilled people
-fall in demand so fall in profit
