2.1 Measures of Economic Growth

Question 1

what is economic growth

Answer 1

it is the rate of change of goods and services which a country produces

Question 2

what’s GDP

Answer 2

the total value of goods and services produced by a country within a year

Question 3

what’s the difference between real and nominal GDP

Answer 3

Real GDP takes out the effects of inflation whereas nominal does not

Question 4

what’s the difference between total and per capita GDP

Answer 4

per capita is total divided by population. total GDP is the overall GDP

Question 5

what’s GNI

Answer 5

its GDP minus remittances (FDI) and adds what’s earned overseas

Question 6

GNP

Answer 6

value of all goods and services produced by citizens of a country regardless of where they live

Question 7

what can these measures show us overtime

Answer 7

-we can compare to other countries (per capita always)
-we can judge economic welfare over time

Question 8

what are PPP

Answer 8

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)

Question 9

problems of GDP

Answer 9

-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

Question 10

what’s inflation deflation and disinflation

Answer 10

• 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)

Question 11

what’s the CPI

Answer 11

its a measure on the standard of living where the ONS collect goods and services into a basket of goods and

Question 12

limitations of CPI

Answer 12

-CPI is not totally accurate as some people might consume other goods than the basket of goods describes
-no price of housing

Question 13

what’s RPI

Answer 13

it’s CPI but it includes house costs, when consumers switch to products with lower inflation and excludes top and bottom 4% income earners

Question 14

what’s demand pull inflation

Answer 14

if demand increases then inflation happens

Question 15

what’s cost push inflation

Answer 15

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

Question 16

effects of inflation on a consumer

Answer 16

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

Question 17

effects on firms

Answer 17

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

Question 18

effect on governments

Answer 18

change in tax and revenue will fall.

Question 19

effect of inflation on workers

Answer 19

if wages don’t increase they have worse living standards

lose jobs as lack of demand

Question 20

what’s the claimant account

Answer 20

number of people receiving benefits for being unemployed

Question 21

what’s the LFS

Answer 21

the labour force survey is a survey carried out by the ONS taking data on people’s welfare and employee status

Question 22

why is the claimant account and the LFS both underestimating the real figure

Answer 22

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

Question 23

what is the economically active

Answer 23

employed and unemployed but the unemployed and inactive are workless

Question 24

what’s under employed

Answer 24

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

Question 25

what’s frictional unemployment

Answer 25

people moving between jobs

Question 26

what’s structural unemployment

Answer 26

industry closures

far away from jobs

technology replaces jobs

Question 27

cyclical unemployment

Answer 27

lack of demand leads to unemployment

Question 28

seasonal unemployment

Answer 28

seasonal demand

Question 29

why does minimum wage cause unemployment

Answer 29

as workers may refuse to take this pay and just live off benefits

Question 30

how does migration effect unemployment

Answer 30

if people move to London for example there will be less jobs and will have lower wages

Question 31

impacts of unemployment to workers

Answer 31

loss of income
loss of skills after long term
lower job security

Question 32

how does unemployment effect firms

Answer 32

fall in profit
low wages
low skilled workers

Question 33

how does unemployment effect consumers

Answer 33

less choice and worse quality in goods
unemployed have less to spend
firms may lower prices

Question 34

how does unemployment effect government

Answer 34

fall in tax revenue
higher spending
increase in budget deficit

Question 35

how does unemployment effect society as a whole

Answer 35

social deprivation
loss of potential national output
taxpayers pay more
high unemployment areas are rough

Question 36

components of the balance of payments

Answer 36

current account and the capital and financial account

Question 37

what I’d the balance of payments

Answer 37

a record of all financial dealings over a period of time between economic agents of one country and all other countries

Question 38

what’s the current account made of

Answer 38

trade in goods and trade in services either imports or exports

Question 39

what’s a current account surplus

Answer 39

exports are greater than imports

Question 40

what are the 5 macro objectives in 2.1

Answer 40

export led growth
high economic growth
low unemployment
low and stable inflation
balance of payments

Question 41

what are the four key ways in how economies in the world are connected (four things)

Answer 41

trade
migration
assests being owned in different countries
technology being shared