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Armstrong > 2.1 > Flashcards

2.1 Flashcards

1
Q

GDP

A

is the market value of all final goods and services produced domestically in a time period

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2
Q

GDP can be measured in 3 ways

A

output measure- value of goods and services produced by all sector the economy
expenditure measure- value of goods and services purchased by households and gov, investment in machinery and building
Income measure-value of the income generated mostly in terms of profits and wages

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3
Q

Formula for GDP

A

C+I+G+(X-M)

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4
Q

GNI

A

Gross national income
GNI is GDP plus what a country earns from overseas investment and subtracts what foreigners earn in a country and send back home

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5
Q

GDP per capita
+calc

A

is used to estimate living standards for people in a country

Total GDP/population

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6
Q

Real GDP

A

is a measure of a country gross domestic product that has been adjusted for inflation

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7
Q

Nominal GDP

A

is the figure given without taking inflation into account

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8
Q

PPP

A

Purchasing Power Parity
Exchange rate- the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country

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9
Q

6 limitation of GDP

A

-the black market-illegal activities, drugs, unreported income
-non-market activities-where money isn’t involved, house chores
-environmental factors
-happiness
-sustainability
-balance of GDP

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10
Q

Black market

A

The shadow economy or black market

Money earned from:
-illicit activities
-illegal drugs
-unreported income of worker

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11
Q

Non market activities

A

-any activities where money isn’t involved
e.g. chores

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12
Q

Environmental factors

A

-poor at recognising environment costs e.g. pollution
-there should be a green GDP

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13
Q

Happiness

A

-no adjustment for happiness
-Should take into account stress levels

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14
Q

Sustainability

A

-not measured sustainability of growth
-faster, economic growth may improved living standards today, but lead to an overall exploitation of scarce resources, thereby limiting future growth prospects for next generation

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15
Q

Balance of GDP

A

-The spending composition of GDP can be very different
-Some countries, large amounts of GDP may be spent on the arms industry, while others may be spend money on health and education

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16
Q

Inflation is

A

When the average price of goods and services is rising over a period of time

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17
Q

Deflation is

A

Negative inflation, when average prices are falling overtime

18
Q

Disinflation occurs

A

When inflation is slowing down, prices are still rising, but at a slower rate

19
Q

What causes inflation (3)

A

-printing money
-Underproduction less output, shortage in the economy
-Oil prices

20
Q

What impact does inflation have

A

-people ask for wage increase
-More strike/industrialise interest
-Falling living standards
-Slow economy
-We become less competitive with other countries

21
Q

What is CPI

A

-consumer price index
-The government measures inflation by tracking the price of typical basket of goods every month
600

22
Q

What are the limitations of CPI

A

-The CPI is not representative for everyone
-New products-slow response to new products
-changing quality of goods and services-prices may rise, but also quantity may rise

23
Q

What are the three other measures of inflation?

A
  • consumer price index, CPI
    -consumer price index, including housing costs (CPIH). (This is a new measure that tries to include more costs, but is improving difficult to measure accurately)
    -The retail price index (RPI) Thus is an older measure of inflation
24
Q

Demand pull inflation

A

-caused by excess aggregate demand
-Often linked to credit boom
-Economy close to full capacity
-C+I+G+X-M =demand on economy

25
Q

Cost push inflation

A

-rising wage costs in labour market
-Increased enroll materials and components costs from domestic and overseas suppliers
-Rising import prices due to a falling exchange rate

26
Q

Money supply

A

-if the supply of money is increased, this is likely to increase prices in the country
-This happens when the guv print money to pay for goods and services

27
Q

Ad/dis of GDP to measure living standards

A

Ad:
-taken an approximate measure of standard of living
-can indicate the health of an economy

Dis:
-only measures average and ignores inequality
-does not count for damage to the environment or goods and services that are not sold for a price

28
Q

Percentage change

A

Change / original x100

29
Q

Factors that can be used to measure well-being

A

Employment
Income
Health
Education
Infrastructure
Environment
Income equality
Economics stability
Government
Civil society

30
Q

How does the Bank of England try to control inflation?

A

-Target of 2% inflation
-Take money from Banks to decrease amount in circulation
-Change the interest rate

31
Q

What are inflationary expectations?

A

Horizon inflation can lead to an increase in inflation expectations. this can then feed through to higher wage claims and rising costs.

32
Q

Winner / loser of inflation

A

Winners:
-workers with strong bargaining power
-Borrowers if Real interest rates are negative
-producer if prices rise faster than costs

Losers:
-Fixed incomes
-Lenders if interest rates are negative
-Savers if real returns are negative
-Workers in low pay jobs

33
Q

Leakages examples

A

Savings
Taxation
Import

34
Q

Injection examples

A

Investment
Governments spending
Export

35
Q

What are the four parts of the circular flow?

A

households-receive income from jobs (can either consume or save)
Firms -make customer demand through output. Pay wages to households. Make investment to expand.
Government -collect tax from households and firms. Gov spending.
External sector -buys imports. Sells exports

36
Q

What is the circular flow of income?

A

It shows connections between different sectors of the economic system

37
Q

Some key objectives of the U.K.’s economic performance are

A

-Price stability
-Growth of real GDP
-Falling unemployment/rising employment
-Higher average, living standards
-Stable balance of trade of imports and exports
-fair distribution of income and wealth

38
Q

What is normative economies

A

A judgement statement/ valued statement
Opinion

39
Q

What is positive Economics

A

Statement that can be proved or tested

40
Q

What is ecometrics

A

The data that economists collect

41
Q

What’s is scarcity and choice

A

We have lots of wants and can’t have them all, so you have to make a choice

Armstrong (11 decks)

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