2.1 Measure of economic peformance Flashcards
Define Index number
- An economic data figure that reflect P/Q compared with base year
- Show % change in P/Q from base year
Difference between GNP and GDP
- GDP is total value of G+S an economy produce in a given period of time
- GNP includes value of all ouput regardless of whether they are located in the counrty or abroad
Define GNI
Includes the income of residents and businessses beyond borders and include remittance payments
Define GDP per capita
GDP divided by population
Output per person
Define living standards
The quality of life and economic wellbeing
Why is GDP a bad measure for living standards in relation to black markets
- Black market/ illegal activity arent included in GDP figure in which people work without declaring their income to avoid tax so GDP is underestimated as these incomes arent taken into account
Why is GDP a bad measure for living standards
- Doesnt take into account transactions without monetary value e.g. housework
- Developing countries often consume what they produce and dont offer it for sale on the market so it has no monetary value
- This often increases Y at the expense of quality of life like stress, long working hours etc- they might want to achieve growth at the expense of health and safety
- Inaccuracy of data- figures are usually converted into US$ but not always accurate for comparison so some argue PPP should be used to take into account the impact of differences in the cost of living in different countries
- Remittances arent included- people who move counry to increase Y then send money back home (this would increase GDP figure)
- Doesnt include income inequality- Distribution in Y is provided as an average, the differences in standard of living within the same country can be significant
Why is GDP a good measure of quality of life
GDP is an international comparable measure
Most countries have GDP data so it is a good measurement of living standards as it allows countries to compare easier
Define unemployment
Individuals not currently employed but actively seeking and available for work
Define structural unemployment
Unemployment that is related to a mismatch between the skills that workers currently possess and the skills that employers require
Define underemployment
An individual is currently in employment, but would like to work more hours.
household-level survey of the employment circumstances of the UK population
The Claimant Count measure of unemployment is constructed by…
counting the number of people claiming unemployment benefits
What is the ILO unemployment
Those actively looking for a job and out of work in the last 4 weeks.
Uses the Labour Force Suvery (LFS)- it is a survey
Why does ILO show higher unemployment than claiment count
Different reasons for collection/different methods
of collection: imply different results
* It is becoming much more difficult to claim unemployment related benefits e.g. changes in the level of savings making it difficult to claim unemployment related benefits
* Stigma issues: when people are unemployed= no stigma for ILO
but high stigma for unemployment related benefits
Reasons why underemployment might increase
o Recession/lack of demand in the market
o Increase in zero-hours/part-time/flexible contracts offered by employers
o Increased mechanisation/use of technology in the workplace
What does unemployment mean in terms of labour
There is a negative output gap and labour resources are not being utilised to their full potential. This means growth, national output, national income and national expenditure is also not being maximised to its full potential to maximise living standards.
