2.1 Measures of Economic Performance Flashcards
Economic Growth
Measures the rate of change in a country’s output (1). An expansion of the productive potential of an economy (1)
Short-run economic growth
The actual annual percentage change in real national output (real GDP)
Long-run economic growth
An increase in the potential productive capacity of the economy
Gross Domestic Product (GDP)
The value of the quantity of goods and services produced in the economy (1) over a period of time (1)
Real GDP
The value of the quantity of goods and services produced in the economy over a period of time (1) adjusted for inflation (1)
Nominal GDP
The value of the quantity of goods and services produced in the economy over a period of time (1) not adjusted for inflation (1)
GDP per capita
The value of total GDP divided by the population of the country
Total national income
The value of all goods and services produced in an economy
Per capita income
The total income divided by the population
GDP: Volume
Considers the quantity of goods and services produced within an economy
GDP: Value
considers the monetary worth of the goods and services produced within an economy
Gross National Product (GNP)
The value of all goods and services produced by domestic businesses both at home and abroad this includes overseas assets
Gross National Income (GNI)
GDP plus income paid into the country by other countries for things such as interest and dividends
Purchasing Power Parities (PPP)
A method that allows us to look at the relative value of different currencies
it takes real GDP and divides it by the number of people within the country
it then converts the income into dollars to allow a comparison between all countries around the world
Happiness Economics
A fairly new branch of economics that looks at how content individuals are with their life from a theoretical and scientific viewpoint
Inflation
A sustained rise in the general price level within an economy (1) in a given time period (1) (usually a year)
Inflation rate
A sustained rise in the general price level within a given time period expressed as a percentage
Consumer price index (CPI)
Measures household purchasing power with the family expenditure survey
This is done by the ONS (Office for national statistics)
The survey finds out what consumers spend their income on from this a basket of goods is created (700 items)
The goods in the basket are weighted according to how much income is spent on each item
Retail price index (RPI)
Alternative measure of inflation (unlike CPI) RPI included housing costs (payment on mortgage interest and council tax
Index numbers
Index numbers are a useful way of expressing economic data time series and comparing/contrasting information
Formula for index numbers
Index number in Year Y = (data value in year Y/Base Year Value) x 100
Demand-pull inflation
A sustained rise in the general price level caused by excessive (aggregate) demand in an economy for goods and services
Cost-push inflation
A sustained rise in the general price level caused by firms responding to rising costs of production by increasing prices of output
Money Supply
A measure of the amount of stock of money in the economy
M0: Narrow Money
includes notes and coins in circulation
M4: broad money
includes M0 (notes and coins) bank deposits and other liquid assets
Deflation
A decrease in the general price level within an economy over a given time period
Disinflation
When the inflation rate is falling but is still positive e.g. falling from 4% to 2%
Shoe leather costs
Due to distorted price signals individuals shop around it is the cost of looking around to fin a cheaper price/best rate of interest
Fiscal Drag
Wages rise in line with inflation and an individual is dragged into a higher tax bracket therefore increasing government tax revenue without altering tax brackets
Menu Costs
Due to fluctuating prices the firm must print new labels and therefore increases their costs
Economically inactive
People of working age who are not seeking work for whatever reason e.g. wealth, discouragement, disability
Unemployment
Those who are willing and able to work but are not employed they are actively seeking work and usually looking to start within the next two weeks
Unemployment Level
The number of people who are unemployed
Unemployment rate
the number of people who are unemployed expressed as a % of the labour force
The Claimant Count
This counts the number of people claiming unemployment related benefits such as Job Seeker’s allowance (JSA) they have to prove they are actively looking for work
Labour Force Survey
Quarterly survey of approximately 60,000 households compiled by the ONS (Office for National Statistics) studying the employment circumstances of the UK population
Underemployment
occurs when workers cannot find a job that is suitable for their qualifications and experience or who cannot find enough hours to work
structural unemployment
occurs with a long term decline in demand for the goods and services in a particular industry leading to job losses
Geographical immobility of labour
Refers to barriers to people moving from one area to another to find work
examples include Family, culture ,language barriers and variation in house prices
Occupational immobility of labour
workers may have specific skills that are not necessarily needed in growing industries which causes a mismatch between the skill on offer from the unemployed and those required by employers looking for workers
Frictional unemployment
Transitional unemployment that occurs as workers move between jobs mainly through career changes or geographical changes
Seasonal unemployment
Occurs when workers are unemployed at different times of the year
Cyclical (Demand-deficient) unemployment
Caused by a lack of demand for goods and services and it usually occurs during periods of economic decline or recessions (when there is a negative output gap)
Real-wage inflexibility (classical) unemployment
occurs when real wage rates are above equilibrium wage rate causing the supply of labour to be greater than the demand for labour
Net migration
The difference between emigration (those leaving the UK) and immigration (those entering the UK)
Full employment
When the number of job vacancies equal the number of people actively seeking work
