1. The UK Economy Flashcards
How do we measure the state of the economy? (traditional indicators of success)
- GDP: The size of an economy is determined by the size of its National Income- this is measured by GDP.
- Employment: The numbers in the labour force, including those unemployed
- Inflation- the price level and how it changes, month to month, year on year.
- Balance of Payments- imports v exports
- Equality- the distribution of income between rich poor,different regions etc.
- Government finances, i.e borrowing requirement, spending etc.
What is the ‘Gini co-efficient’?
The Gini co-efficient measures the levels of equality/inequality within a country.
The higher the number, the more unequal a country is.
What are the causes of short term growth?
Increases in GDP, brought about by an increase in AD or AS.
E.g. Increase in C, increase in I;
increase in G, X-M
What are the causes of long term growth?
The vertical bit of the LRAS shifts right, or the PPF shifts outwards.
This may occur due to an increase in the factors of production:
More land- (reclaiming waste land from the sea, tapping a natural resource e.g. fracking)
More labour- (immigration/better training/educational qualifications
More capital- improved technology, infrastructure
More enterprise- deregulation
What is the output gap?
The output gap is the difference between the actual level of national output and the estimated potential level and is usually expressed as a percentage of the level of potential output.
