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A Level Revision stuffs > 2.1 Measures of Economic Performance > Flashcards

2.1 Measures of Economic Performance Flashcards

1
Q

Economic growth

A

the rise in value of GDP

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2
Q

GDP

A

the quantity of goods + services produced in an economy

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3
Q

Difference between real and nominal GDP

A

real is adjusted for inflation

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4
Q

GDP per capita

A

total value of GDP divided by the population

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5
Q

Limitations of using GDP to measure living standards

A
  • does not give any indication of distribution of income
  • gives no indication of welfare
  • does not account for large hidden economies eg the black market
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6
Q

Inflation

A

persistent increase in the general price level in an economy over a year

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7
Q

Deflation

A

the decrease in the general price level

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8
Q

Disinflation

A

when the general price level is still rising, but to a slower extent

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9
Q

How to work out index number?

A

raw #/base year raw # x 100

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10
Q

What is the CPI?

A

consumer price index which is a weighted basket of goods and services

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11
Q

Downsides of the CPI

A

personal inflation rates differ (CPI assumes an ‘average family’ ideology, housing costs are not included, basket updates are too slow

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12
Q

Two causes of inflation

A

cost push + demand pull

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13
Q

What is cost push inflation?

A

when firms face rising costs and so SRAS shifts to the left

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14
Q

Causes of cost push inflation

A

increase in raw materials, wages, business taxes eg VAT, price of imported raw materials (due to a weaker exchange rate)

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15
Q

What is demand pull inflation?

A

when AD is growing unsustainably, there is increased pressure on FOPs which causes producers to increase their prices

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16
Q

Causes of demand pull inflation?

A

anything that increases AD for eg lower interest rates, increased govt spending, weak exchange rate, decreased income/corporation tax

17
Q

Costs of inflation

A
  • decrease in purchasing power (esp on low income households)
  • reduced international competitiveness,
  • anticipated inflation - wage/consumption spirals (can increase costs of production leading to an increase in price where workers may demand more wages)
  • uncertainty (can put firms off investing which reduces AD)
  • erodes value of savings
18
Q

Benefits of inflation

A
  • stable levels of consumption (incentivises BUY NOW culture which is good for economy)
  • increased production (firms can gradually increase prices leading to more profit)
19
Q

Unemployment

A

those of working age who are willing and able to work but do not have a job

20
Q

Underemployment

A

those who have a job, but their labour is not used to its full productive potential

21
Q

2 measures of unemployment in the UK

A

LFS + claimant count

22
Q

What is the claimant count?

A

the # of people claiming unemployment related benefits

23
Q

Costs of unemployment

A
  • lost output (operating inside the ppf)
  • budget deficit is worsened (more finances spent on unemployment benefits)
  • hysteresis (workers who become demotivated and lose skills over time)
  • loss of income
  • social costs (increased crime, anxiety, depression, divorce etc)
24
Q

Benefits of unemployment

A
  • firms benefit from a larger labour pool

- workers have time to search for best job for them (some frictional U can be good for an economy)

25
Q

Structural U

A

occurs with a long term decline in demand for the goods and services in an industry, which costs jobs + it can be worsened by immobility

26
Q

Frictional U

A

when people are searching fro a new job (short term)

27
Q

Cyclical U (demand-deficient)

A

general lack of demand for goods + services within an economy

28
Q

Seasonal U

A

occurs at different points within a year

29
Q

Example of structural U

A

tech jobs have left jobs at risk due to automation

30
Q

Example of cyclical U

A

covid-19 + the hospitality sector

31
Q

4 components of the current account

A

trade in goods, trade in services, income, transfers

A Level Revision stuffs (16 decks)

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