2.1 Flashcards
purchasing power parity definition
measure of price of specific goods in different countries to compare currencies
ways to calculate GDP (3)
expenditure, income and output
limitations of GDP (6)
not: per-capita
hidden economy
inequality (rich get rich)
environmental deg.
comparison (inaccurate)
happiness
things GDP excludes (5)
intermediate goods
illegal goods
used goods
goods produced outside UK
transfer payments (pension)
difference between real and nominal
real is adjusted for inflation, nominal isnt
how is CPI calculated
720+ services and goods are surveyed and price change is calculated, basket of goods is found and then measured over time
causes of inflation (6)
rising property prices
rising oil prices
£ depreciation
cut in interest rates
decrease in VAT
workers expecting inflation
problems with inflation (4)
worsens inequality
erodes value of money
uncertainty lowers confidence
high relative = fewer exports
problems with deflation (2)
sign of economic slowdown
discourages consumer spending which leads to downwards spiral
limitations of CPI (4)
not fully representative (only takes average)
basket of goods outdated
data collection issues
doesnt count quality or quantity
underemployment definition
employed but seeking more hours
types of unemployment (6)
seasonal
frictional
geographical
structural
real wage
cyclical
GDP definition
total value of new goods and services produced in a year
