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Topic 2 - Economics > 2-1 Measures of economic performance > Flashcards

2-1 Measures of economic performance Flashcards

1
Q

When does economic growth occur?

A
  • When there is a rise is GDP
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2
Q

What is GDP?

A
  • Measures the quantity of goods and services produced in an economy
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3
Q

What is real GDP?

A
  • GDP adjusted for inflation
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4
Q

What is nominal GDP?

A
  • GDP not adjusted for inflation
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5
Q

What is total GDP?

A
  • Combined monetary value of all goods and services produced within a country’s borders over a given time period
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6
Q

What is GDP per capita?

A
  • The value of total GDP divided by the total population of a country
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7
Q

What is GNP?

A
  • The market value of all products produced in an annum by the labour and property supplied by the citizens of one country
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8
Q

What is GNI?

A
  • The sum of value added by all producers who reside in a nation, plus net overseas interest payments and dividends.
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9
Q

What is purchasing power parity?

A
  • Theory that estimates how much the exchange rate needs adjusting so that an exchange between countries is equivalent, according to each currency’s purchasing power
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10
Q

What are the limitations of using GDP to compare living standards?

A
  • GDP does not give an indication of distribution of income
  • GDP does not account for purchasing power
  • GDP does not account for hidden economies
  • GDP does not account for welfare
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11
Q

What is inflation?

A
  • The sustained rise in the general price level over time.
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12
Q

What is deflation?

A
  • The sustained fall in the general price level over time.
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13
Q

What is disinflation?

A
  • A fall in the rate of inflation.
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14
Q

What is Consumer Price Index?

A
  • Used to calculate inflation
  • Family expenditure survey used
  • Weighted basket of goods
  • Measures average price change of goods
  • Updated annually
  • Uses a base year
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15
Q

What are the limitations of CPI when measuring inflation?

A
  • Basket of goods is only representative of the average household.
  • Different demographics have different spending patterns
  • CPI is slow to respond to new goods and services.
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16
Q

What is the Retail Price Index?

A
  • Alternative measure of inflation
  • RPI includes housing costs.
  • Excludes top 4 percent and bottom 4 percent of earners.
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17
Q

What are the limitations of RPI?

A
  • RPI does not consider the fact that when prices rise, people will switch to a substitute good.
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18
Q

What are the causes of inflation?

A
  • Demand Pull
  • Cost Push
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19
Q

What is demand-pull inflation?

A
  • Increased demand with limited supply so producers increase prices.
20
Q

What are the triggers of demand-pull inflation?

A
  • Depreciation in the exchange rate.
  • Lower taxes or increased government spending
  • Lower interest rates
  • High growth
21
Q

What is cost-push inflation?

A
  • Occurs when firms face rising costs
22
Q

What are the triggers of cost-push inflation?

A
  • Increase in raw materials costs.
  • Expectations of inflation
  • Indirect taxes
  • Depreciation in the exchange rate
  • Monopolies
23
Q

What are the effects of inflation on consumers?

A
  • Low and fixed incomes are hardest hit by inflation.
  • Value of loans will fall
24
Q

What are the effects of inflation on firms?

A
  • Investing is more attractive as lower interest rates.
  • Workers might demand higher wages.
  • Firms may be less price competitive on a global scale.
  • Unpredictable inflation will reduce business confidence.
25
Q

What are the effects of inflation on the government?

A
  • Increased welfare payments
26
Q

What are the effects of inflation workers?

A
  • Real incomes fall with inflation
  • Wage cuts.
27
Q

What are the measures of unemployment?

A
  • The Claimant Count
  • Labour force Survey
28
Q

What is the claimant count?

A
  • The number of people claiming unemployment benefit such as job seeker’s allowance.
29
Q

What are the issues with Claimant Count?

A
  • Does not account for those who do not claim the benefit.
30
Q

What is the Labour Force Survey?

A
  • Been out of work for 4 weeks
  • Able and willing to start work within 2 weeks
  • Workers should be available for 1 hour per week. Part time unemployment is included.
31
Q

Who are unemployed?

A
  • Those able and willing to work but are not employed.
  • They are actively seeking work and usually looking to start within the next two weeks.
32
Q

Who are underemployed?

A
  • Those who have a job, but their labour is not used to its full productive potential.
  • Those who are in part-time work but are looking for more hours.
33
Q

What are the effects of changed in employment on consumers?

A
  • If consumers are unemployed, they have less disposable income.
  • Psychological impacts of losing a job
34
Q

What are the effects of changed in employment on firms?

A
  • Increased unemployment means wages decrease.
  • Consumer spending falls with high levels of unemployment.
35
Q

What are the effects of changed in employment on workers?

A
  • Fall in wages
36
Q

What are the effects of changed in employment on the government?

A
  • Increased spending on JSA
  • Decreased tax revenue
37
Q

What are the effects of changed in employment on society?

A
  • Increased crime rates
38
Q

Who are economically inactive?

A
  • Those who are not actively seeking a job.
39
Q

What are the causes of unemployment?

A
  • Structural
  • Frictional
  • Seasonal
  • Demand deficient
  • Real wage inflexibility
40
Q

What is structural unemployment?

A
  • Long term decline in demand for the goods and services in an economy
41
Q

What is frictional unemployment?

A
  • Time between leaving a job and looking for another job.
42
Q

What is seasonal unemployment?

A
  • Certain times of the year.
43
Q

What is demand deficient unemployment?

A
  • Lack of demand for goods or services, usually during a recession.
44
Q

What is real wage inflexibility?

A

Real wage unemployment occurs when wages are set above the equilibrium level causing the supply of labour to be greater than demand.

45
Q

How does migration affect unemployment?

A
  • Supply of labour increases
  • Bring high quality skills
  • Brings down lowest paid wages

Topic 2 - Economics (6 decks)

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