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Economics year 1- Macro > 2.1 Measures of ecnomic performance > Flashcards

2.1 Measures of ecnomic performance Flashcards

1
Q

What is inflation

A

General increase of prices in an economy over a period of time

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2
Q

Deflation

A

Fall in prices of goods and services over a period of time in an economy

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3
Q

Disinfaltion

A

Decrease in the rate that prices rise in an ecnomy

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4
Q

How does inflation affect consumers?

A
  1. If incomes remain the same then people have less disposible income to spend and standard of living drops
  2. People in debt can pay off the debt which is now less valueable
  3. Savers lose out as the money is not as valuable
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5
Q

How does inflation affect firms?

A
  1. Goods prices rise means that they are less competitive in global markets, balance of paymenst decrease (X-M)
  2. Deflation means that people are better of saving so demand decreases
  3. It is difficult to predict so it makes it hard for firms to plan
    4.
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6
Q

How does inflation affect Government

A
  1. If they dont change tax rates than they may lose out on real tax revenue as £1 on 100 kilos of sugar is now less than before
  2. If they dont change tax thresholds they get more tax revenue but tax payers have less dispocible income
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7
Q

How does inflation affect workers?

A
  1. If wages dont increase there real wage will decrease and so standard of living decreases
  2. Deflation can cause workers to lose jobs as there is a lack of demand
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8
Q

Economic growth?

A

Rate of change of output. Increase in the long term productive potential of an ecnomy.
Shown on PPf or rate of change in GDP

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9
Q

What is GDP?

A

Measure of output in an economy, indicator of standard of living in economy, easy to compair year on year and country on country

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10
Q

Difference in real and GDP per capita

A

Total GDP= overall GDP in country
GDP per capita= Total GDP/ people in country

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11
Q

Difference in real GDP and GDP per capita

A

Real GDP= adjusted to inflation
Nominal GDP= doesnt adjust to inflation

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12
Q

What is Gross National Product(GNP)

A

GDP + net property income from abroad

Value of goods and services(GDP) produced by all members of the country in and out of the country.

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13
Q

Purchasing power pariaties

A

How much of your currency gets you. £2 a day in uk isnt enough whereas in kenya it would be fine

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14
Q

What is Gross National Income (GNI)

A

Value of GDP produced by a country plus net overseas payments

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15
Q

Problems of GDP to measure growth

A
  1. Countries are inefficent at collecting data so comparisions can be wrong
  2. Black market- hidden exchnage of money
  3. Doesnt take into account home-grown products- farmers eating their own food wont be accounted for
  4. Error in counting inflation rate makes real GDP wrong
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16
Q

How to calculate national happiness

A
  1. real GDP per capita
    2.life expectancy
    3.having someone to count on
    4.perceived freedom to make life choices
    5.freedom from corruption
    6.generosity
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17
Q

CPI?

A

Measures increase in price of a basket of goods every month to measure inflation. They change the goods based in how they are used and it is weighted on how much households use the goods or services

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18
Q

Limitations of CPI

A
  1. Cant measure every single good sold so wont be 100% correct
  2. Doesnt included price of housing
    3.
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19
Q

RPI

A

RPI is CPI but includes the cost of housing

20
Q

Claimant count

A

\Number of people who claim unemployment benefits like JSA

21
Q

Unemployed

A

16-65 who are actively seeking work and havent in 4 weeks but are able to work within 2 weeks

22
Q

Inactive

A

People of working age not able to work-> education, injured,heakth issues

23
Q

The Labour Force Survey (LFS)

A

Survey a sample of households and asks questions about ecnomic position to class people as employed or unemployed

24
Q

EV of claimant count and LFS

A
  1. Some people are not eligible for benefits but will be considered unemployed
  2. Not all unemployed people claim benefits
    3.People fraudulently claim benefits
25
Q

Under-employment

A
  1. People who want to work more hours9 parttime/0 hour contracts)
  2. People whos job doesnt reflect there skill, they are too high skilled for their job
26
Q

Increase in activity

A

Decrease size of labour force and so ppf decreases and GDP slows/decreases

27
Q

Frictional unemployment

A

Unemployment due to changing jobs
e.g. People in eductaion after getting a degree newly in the market

28
Q

Structurual unemployment

A

As a market fails those employees dont have skills for other markets

29
Q

Cyclical unemployment

A

Unemployment during different parts of the trade cycle recession means unemployment increases

30
Q

Seansonal unemployment

A

People are only hired during different seasons

31
Q

Real wage infelxibility

A

Real wages above equilbirum wages so their is an excess supply of labour e.g. minium wage

32
Q

Affects of migration

A
  1. Increase employment means growth as they have more employees
  2. Lower wages as supply of labour increases and migrants are willing to work for lower wages so there is more competition for jobs
33
Q

Impacts of unemployment on workers

A
  1. People who lose jobs have a loss of income and standard of living drops
  2. Stigma of being unemployed leads to stress and anxiety
  3. Long-term unnemployment (12 months+) means workers lose skill and find it harder to get a job
    4.Lower job security decreases productivity
34
Q

Impacts of unemployment on firms

A
  1. Decrease in demand for goods so profits fall
  2. Long term unemployment means skill decrease so firms have less options for employment
  3. Offer lower wages as people need jobs
35
Q

Impacts of unemployment on consumers

A
  1. Shops shut down so they have less choice
  2. Less to spend
    3.Firms may lower prices so standard of living increases
36
Q

Impacts of unemployment on government

A

1.Fall in tax revenue and increase in spneding on unemployment so opportunity costs and a defict increase

37
Q

Impacts of unemployment on society

A
  1. Increase in crime
    2.National output decreases
38
Q

3 components of balance of payments

A
  1. Current account
    2.Capital account
    3.Financial account
39
Q

What is balance of payments

A

Recording of all financial transactions over a period of time within and out of a country

40
Q

2 parts of current account

A
  1. Trade in goods- physical goods
  2. Trade in servcies- not tangable services
41
Q

Income and wage transfers

A

Profits made into a country abroad going back into the host country. Uk company producing in china sending profits back to the uk

42
Q

Primary income

A

Profit from uk residents from abroad

43
Q

Secondary income

A

Overseas aid or investment

44
Q

4 Government objectives

A
  1. Low unemployment (2%)
  2. Low and stable inflation (2%)
    3.Balance of payments equilibrium
    4.High ecnomic growth
45
Q
A

Economics year 1- Macro (5 decks)

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