2.1 Measures of Economic Growth Flashcards
what is economic growth
it is the rate of change of goods and services which a country produces
what’s GDP
the total value of goods and services produced by a country within a year
what’s the difference between real and nominal GDP
Real GDP takes out the effects of inflation whereas nominal does not
what’s the difference between total and per capita GDP
per capita is total divided by population. total GDP is the overall GDP
what’s GNI
its GDP minus remittances (FDI) and adds what’s earned overseas
GNP
value of all goods and services produced by citizens of a country regardless of where they live
what can these measures show us overtime
-we can compare to other countries (per capita always)
-we can judge economic welfare over time
what are PPP
Purchasing Power Parities are a different way to compare GDP between countries. exchange rate of one countries currency compared to another using a basket of goods to compare (big mac survey)
problems of GDP
-doesn’t represent living standards
-doesn’t take in account FDI or take away remittances
-hidden markets aren’t taken into account
-an increase in GDP of a country could just mean one certain group has increased income
-issues over which currency should be used to measure
-quality of goods and services are much better than 50 years ago
what’s inflation deflation and disinflation
- inflation is the increase in prices in the economy which decreases the purchasing power of money
- deflation is the fall of prices in an economy
- disinflation is the slow down of inflation (prices are still rising)
what’s the CPI
its a measure on the standard of living where the ONS collect goods and services into a basket of goods and
limitations of CPI
-CPI is not totally accurate as some people might consume other goods than the basket of goods describes
-no price of housing
what’s RPI
it’s CPI but it includes house costs, when consumers switch to products with lower inflation and excludes top and bottom 4% income earners
what’s demand pull inflation
if demand increases then inflation happens
what’s cost push inflation
decrease AS pushes up prices as there’s less of it so therefore inflation. onto of this if businesses see prices have risen they will push up there prices to maintain profit margins
effects of inflation on a consumer
of incomes don’t rise with inflation less to spend and fall in living standards.
those who are in debt pay it back with less to lose as money Is worth less
people feel less well off
effects on firms
if inflation is higher in Britain than other countries british goods more expensive so exports decrease.
deflation is bad as people save more as they wait for prices to decrease further
effect on governments
change in tax and revenue will fall.
effect of inflation on workers
if wages don’t increase they have worse living standards
lose jobs as lack of demand
what’s the claimant account
number of people receiving benefits for being unemployed
what’s the LFS
the labour force survey is a survey carried out by the ONS taking data on people’s welfare and employee status
why is the claimant account and the LFS both underestimating the real figure
don’t include part time workers who would like to work full time
on gov training schemes who would like to work
sick or disabled
what is the economically active
employed and unemployed but the unemployed and inactive are workless
what’s under employed
part time who want to be full time
people who are in jobs which don’t reflect their work skills
their not included in the unemployed stats
these rates increase in recessions as employee hours will just be reduced to cut down on costs
what’s frictional unemployment
people moving between jobs
what’s structural unemployment
industry closures
far away from jobs
technology replaces jobs
cyclical unemployment
lack of demand leads to unemployment
seasonal unemployment
seasonal demand
why does minimum wage cause unemployment
as workers may refuse to take this pay and just live off benefits
how does migration effect unemployment
if people move to London for example there will be less jobs and will have lower wages
impacts of unemployment to workers
loss of income
loss of skills after long term
lower job security
how does unemployment effect firms
fall in profit
low wages
low skilled workers
how does unemployment effect consumers
less choice and worse quality in goods
unemployed have less to spend
firms may lower prices
how does unemployment effect government
fall in tax revenue
higher spending
increase in budget deficit
how does unemployment effect society as a whole
social deprivation
loss of potential national output
taxpayers pay more
high unemployment areas are rough
components of the balance of payments
current account and the capital and financial account
what I’d the balance of payments
a record of all financial dealings over a period of time between economic agents of one country and all other countries
what’s the current account made of
trade in goods and trade in services either imports or exports
what’s a current account surplus
exports are greater than imports
what are the 5 macro objectives in 2.1
export led growth
high economic growth
low unemployment
low and stable inflation
balance of payments
what are the four key ways in how economies in the world are connected (four things)
trade
migration
assests being owned in different countries
technology being shared
