1.2/1.3 Macroeconomic Indicators And Index Numbers Flashcards
How do we measure economic growth?
Real gross domestic product
Gross domestic product definition
A measure of the national income of an economy, based on the value of all income earned in an economy over a period of time
National income definition
Total income generated within an economy over a period of time
Real gross domestic product definition
Measures the value of GDP after removing the affect of price changes
Real gross domestic product per capita definition
Income per person
Real GDP per capita equation
Real GDP
—————
Population
How do we measure price stability?
Consumer price index and retail price index
Inflation definition
An increase in the average level of prices measured over a period of time
Price level definition
The average level of prices of a range of goods and services at a point in time
What does CPI not include that RPI does?
Mortgage payments/rates
How does CPI and RPI work?
- The survey finds out what consumers spend their income on. From this basket of goods created.
- The goods are weighted according to how much income is spent on each item
- then measure inflation form comparing the basket of good from different months
What is the headline inflation indicator?
Consumer price index
How do we measure unemployment?
Claimant count as the labour force survey
Unemployment definition
Those of working age who are currently out of work but actively seeking work
Labour force definition
Those of working age are either in work or actively seeking work
Claimant count definition
The measure of unemployment in the UK that counts those receiving unemployment benefits
Unemployment rate definition
The number of unemployed people expressed as a percentage of the current labour force
What unemployment indicator is used in UK?
The labour force survey
Unemployment rate equation
Number of people unemployed
—————————————
Size of labour force
X100
Productivity definition
Measure of efficiency comparing the level of output with the level of inputs
Labour productivity definition
Output per worker, per hour
Capital productivity definition
The output per item of capital equipment measured over a period of time
Current account definition
The net income flows earned through either trading goods and services or from investments located overseas
Current account deficit definition
When the flows of money out of the country is greater than the flows of money into the country
What are the three sections the balance of payments is divided into?
- current account
- capital account
- financial account
Index number definition
A number designed to be used to show the size of changes in a variable over time
What is a base year?
When a year starts of at an index number of 100 and all other years are compared to this year
Weighted price index definition
And average level of prices adjusted so the price changes in popular items affect the price index more than prices changes in less popular items
Problems with CPI
- as it is based on imaginary typical family it never really reflects anyone’s exact spending patterns
- includes goods and services not everyone buys e.g. cigarettes
- doesn’t take into account a change in the quality of the item eg a computer may cost more in 2019 then in 2018 but it is more advanced
