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Economics - Macro > 2:1:1 - Measures Of Economic Performance - Economic Growth > Flashcards

2:1:1 - Measures Of Economic Performance - Economic Growth Flashcards

1
Q

What is Microeconomics?

A

Is the study of individual markets within an economy

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2
Q

What is Macroeconomics?

A

Is the study of the economy as a whole.

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3
Q

What does the Economic system attempt to resolve?

A

The basic economic problem (of scarce resources in a world infinite wants)

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4
Q

What is Economic Growth?

A

Is the rate of change of output

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5
Q

Why is there a standard definition of output?

A

So we can compare measurements with other countries.

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6
Q

What is the measure of Economic Growth?

A

GDP (Gross Domestic Product)

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7
Q

Why is Economic Growth desirable?

A

Individuals prefer to consume more rather than fewer goods and services.

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8
Q

Evaluative points for Economic Growth being desirable?

A

Based on the assumption that wants are infinite.

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9
Q

Why is Unemployment a major problem in society?

A

Represents a waste of scarce resources

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10
Q

Why is unemployment an indicator of poor national economic performance?

A
  • Output could be higher if unemployed were in work

- Leads to poverty for those who are out of work.

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11
Q

Why are Economic Growth and Unemployment linked?

A
  • Fast-growing economies tend to have low unemployment because more workers are needed to produce goods and services
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12
Q

Evaluative point for the link between Economic Growth and Unemployment.

A

Technological change allows economy to produce more with fewer workers.

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13
Q

What happens to Unemployment if Economic Growth is negative?

A

Firms lay off workers and unemployment will rise.

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14
Q

What does a higher rate of job creation show about an economy?

A

There is fast economic growth.

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15
Q

Define Inflation.

A

Is the general increase in prices of an economy.

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16
Q

Which is seen to be better low or high inflation?

A

Low inflation is generally seen to be better

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17
Q

Effects of Inflation.

A
  • Means that the value of what savings can buy falls

- Disrupts the knowledge of prices in a market

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18
Q

What is GDP a measure of?

A

Economic growth

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19
Q

What is ACTUAL economic growth?

A

Is an increase in real incomes or gross domestic product (GDP)

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20
Q

What is Potential Economic Growth?

A

Is an increase in the productive capacity in a country

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21
Q

What are the differences between actual and potential economic growth called?

A

Output gap

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22
Q

What is taken into account when calculating GDP?

A
  • Sum of all the goods and services produced in a country in 1 year
  • Sum of all incomes earned in a country in a year
  • Sum of all expenditure in a year
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23
Q

Does GDP include earnings from residents while outside the country?

A

NO

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24
Q

What is the GDP of the UK?

A

£1.4 trillion

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25
Q

Who calculates the GDP?

A

Government

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26
Q

What can cause the GDP figure to be inaccurate?

A
  • Errors and Omissions
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27
Q

Why is GDP not the same as Economic Growth?

A

Because for GDP we need to know

  • how many people there are
  • the value of the currency in terms of spending power
  • what changes have been made since the previous measure
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28
Q

What does a increasing GDP show?

A

Economic growth (increasing: incomes, output and spending)

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29
Q

What is Deflation?

A

Falling Prices

30
Q

What is a nation’s spending on foreign goods and services known as?

A

Value of its imports

31
Q

How does a nation pay for these imports?

A

By selling goods and services (exports)

32
Q

When is an economy sounds in the Balance of Payments eyes (imports & exports) ??

A

When exports are greater or equal to its imports

33
Q

What is it called when exports are greater than imports?

A

A Current Account Surplus

34
Q

What is it called were imports exceed exports?

A

A Current account Deficit

35
Q

When do deficits become a problem for a country?

A

When banks stop lending money to the government.

36
Q

What happens when banks stop lending to the government?

A

Credit Crunch

37
Q

How do countries respond to banks no longer lending (when the deficit becomes too great) ??

A

Have to restore confidence

- Done by cutting public spending which then leads to reduced economic growth and rising unemployment.

38
Q

What is increasing GDP a sign of?

A

A sign that a country is experiencing increasing incomes, output and spending

39
Q

How is GDP linked to standard of living?

A

Increasing GDP means people can have more goods and services, implying they have a better standard of living

40
Q

Evaluative points for Increasing GDP improving Quality of Life.

A
  • Someone earns more,
    • they may work more hours
    • Pollution is likely to increase as they travel further distances(so many more social costs)
    • Get more accurate results GDP should be calculated by GDP per capita (per head)
41
Q

Economic Growth is measured using [……….][……..]

A

National Income

42
Q

Why is measuring Economic Growth using National Income meaningless?

A

Because they are nominal values (not taking into account inflation)

  • If Inflation is 2% and your wage rise is 2%, your real wages have not risen at all!
43
Q

What is meant by Real Values?

A

Have been adjusted to remove the effects of inflation

44
Q

What is meant by Nominal Values?

A

Current incomes that you would see if they were unadjusted (not taking into account inflation)

45
Q

Why are Values and Volumes important when measuring Economic Growth?

A
  • Firms may achieve higher sales figures because they sell more in volume.
  • but if those sales are worth less per unit then they are not seeing an increase in the value of their output.
46
Q

What is Gross National Product?

A

Is the total market value of all goods and services produced by domestic residents.

47
Q

How is GNP calculated?

A

GNP = GDP + income residents have received from abroad - income claimed by non residents

48
Q

When may GNP be much lower than GDP?

A

If much of the income from a country’s production flows to foreign people or firms

49
Q

What may cause GNP to be higher than GDP?

A

People or firms of a country hold large amounts of stocks, bonds of firms and receive income from them.

50
Q

What is GNI?

A

Measures income received by a country both domestically and from overseas

51
Q

What does GNI stand for?

A

Gross National Income

52
Q

How is GNI calculated?

A

GNI = GDP + Income paid into the country by other countries

53
Q

Similarities of GDP and GNI?

A

Both measure output from the citizens and companies of a particular nation.

54
Q

Evaluative points of growth figures (GDP figures) depends on.

A
  • How well odd the country is in the first place
  • How much of the Output is self consumed, so it doesn’t appear on GDP
  • Methods of calculation and reliability of data
  • Relative exchange rates - do they represent purchasing power of the local currency
  • Type of spending by government - is money spent on warfare or quality of life issues?
55
Q

What are Purchasing Power Parities?

A

When values are expressed in accordance with the amount that the currency will buy in the local economy. Basket of goods bought in Japan to same basket in US

56
Q

What is analysing Purchasing Power Parities useful for international comparisons?

A

Much more helpful because where the cost of living is high it would be expected that the PPP value of the GDP would be lower.

57
Q

Limitations of using GDP to compare living standards between countries over time.

A
  • Subsistence, barter and the hidden economy
  • The informal economy
  • Currency Values
  • Income Distribution
  • Size of the Public Sector
  • Consumer and Capital Spending
  • Quality Issues
58
Q

Limitations of using GDP to compare living standards between countries - what is Subsistance, barter and the hidden economy?

A
  • If farmers consume their own output ( Subsistence )
  • If goods are traded without the price system (Barter)
  • Goods are bought without being declared for tax purposes, National income will not reflect the true standard of living. (Hidden Economy)
59
Q

Limitations of using GDP to compare living standards between countries - What is the Informal Economy?

A

When some output is not bought or sold and is not recorded, but is still output.

60
Q

Limitations of using GDP to compare living standards between countries - What is meant by Currency Values?

A

Purchasing Power of that country

61
Q

Limitations of using GDP to compare living standards between countries - What Is meant by Income distribution?

A
  • Income per head, some sense of income distribution should be taken into account
  • Large proportion of income earned by very few which makes the mean income much higher than the income enjoyed by the ordinary person
62
Q

Limitations of using GDP to compare living standards between countries - What is meant by the Size of the Public Sector?

A
  • If much of the spending in the economy is by the government, it might or might not improve welfare for the population.
63
Q

Limitations of using GDP to compare living standards between countries - What is meant by Consumer and Capital Spending?

A
  • Spending in Investment goods might mean standard of living increases in the future, but at the expense of living standards today.
  • Economic figures should be broken down to look at the investment element
64
Q

Limitations of using GDP to compare living standards between countries - What is meant by Quality Issues?

A
  • Are improving results enough to prove that living standards are rising?
65
Q

[…..][……..][……][…..][…..] is a good guide to actual growth if the limitations of using GDP to compare living standards between country factors are taken into account.

A

Real income growth per head

66
Q

Is National Happiness a limitation of using GDP to take into account other measures of living standards.

A

Yes

67
Q

What is meant by Gross National Happiness Index? (GNH)

A

Is an indicator that measures quality of life in more holistic and psychological terms than only using GDP.

68
Q

Evaluative point for National Happiness.

A
  • It has only been used in Bhutan.

- In the UK the ONS measures national Well-Being

69
Q

What is meant by Easterlin Paradox?

A

Is the idea that happiness rises with the average incomes, but only up to a point.

70
Q

With Easterlin Paradox what happens to happiness when it reaches this ‘point’ in time?

A

The marginal gains in happiness fall.

Economics - Macro (27 decks)

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