2.1 Flashcards
Explain:Economic growth
-Economic growth is defined as the expansion of the productive potential of the economy. It can be depicted by an outward shift in the PPF or an outward shift in a country’s LRAS curve.
Explain the policy objective of economic growth
The government’s economic growth macroeconomic objective is to have sustained and sustainable economic growth. This aims to provide macro stability.
Explain The different stages of the economic cycle
The economy goes through periods of booms and busts.
Boom is when economic growth is fast, and it could be inflationary or unsustainable.
● During recessions, the real output in the economy falls, and there is negative economic growth.
● During recessions, governments might increase spending to try and stimulate the economy
Explain Real and nominal GDP as well as GDP PER CAPITA
> Real GDP is the value of GDP adjusted for inflation.
> Nominal GDP is the value of GDP without being adjusted for inflation.
> GDP per capita is the value of total GDP divided by the population of the country.
Explain, with the aid of a diagram: Short run and long run economic growth
> Short term growth is calculated annually by the percentage change in real national output. Long term growth is a trend, which is a potential.
> A right shift in the AD curve shows short run economic growth. This is from AD1 to AD2. Negative economic growth is shown by AD1 to AD3.
> Potential growth: long run expansion of the productive potential of an economy. It is caused by increases in AS. Potential output of an economy is what economy could produce if resources were fully employed.
A right shift in the LRAS curve shows long run economic growth. Long run growth can also be shown by an outward shift in the PPF.
Explain: The structure of an economy in terms of primary, secondary and tertiary sectors
> Primary sector of an economy covers the extraction of raw materials.
> Secondary sector is largely manufacturing, where raw materials are made into goods.
> Tertiary sector is the supply of services, such as finance and restaurants. Developed countries have large tertiary sectors.
Explain different macroeconomic measures such as the Human Development Index (HDI)
> HDI:The three dimensions of the Human Development Index (HDI) The components of HDI are education, life expectancy and standard of living, measured by real GNI at purchasing power parity (PPP) per capita.
It measures economic and social welfare of countries over time.
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Explain:Employment and unemployment
Unemployed are 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. Those in employment are those with a job.
Explain The policy objective of full employment
Governments aim to have as near to full employment as possible.
Explain:The labour force survey and claimant count measures of unemployment
> The Claimant Count
This counts the number of people claiming unemployment related benefits, such as Job Seeker’s Allowance (JSA). They have to prove they are actively looking for work.
> Labour Force Survey (LFS) The LFS is taken on by the ILO. It directly asks people if they meet the following criteria.ince the part time unemployed are less likely to claim unemployment benefit, this method gives a higher unemployment figure than the Claimant Count.
