2.1 Measures of economic performance Flashcards
2.1.1 A)
what does GDP measure
the value of all final goods / services produced in an economy
economic growth
2.1.1 A)
methods of measuring GDP value economy
1) expenditure method - consumer expenditure + investment + government + spending + net trade ( export - import)
2) income method - wage + interest + profit + rent
should add to same value
income = output = expenditure
2.1.1 B)
distinction between
real and nomial
Real GDP
- taken inflation into account GDP ^10% , inflation ^6%
= real GDP ^4%
nominal
- value of goods and services in a year within an economy
2.1.1 B)
distinction between
total and per capita
Total GDP
- total value of goods and services in a year within an
economy
per capita
- takes population into account GDP / population used
to compare standard of living
2.1.1 B)
distinction between
value and volume
volume
- adding up the quantity of goods and services in a
year
value
calculating the value of all the goods and services produced in a year
2.1.1 C)
other national income measures
Gross National Income
Gross National Product
2.1.1 C)
what is gni
GDP + income into the countries by other countries interest / dividedness
(for countries w large foreign population who send money back home)
2.1.1 C)
what is gnp
value of goods / services produced by citizen regardless of location
2.1.1 D)
What should we do to compare rates of growth between countries over time
Use gdp [per capita
use real data over normal for fair comparison
2.1.1 E)
What does PPP stand for
and what is it used for
purchasing power parties
helps compare cost of living convert all to dollars
(Check Notes for example)
2.1.1 F)
What is the limitation of using GDP to compare standard of living
-GDP doesn’t include unofficial work / goodwill work
- increased in GDP doesn’t mean its shared equally doesn’t show increase standard of living
- GDP doesn’t take pollution , stress into account
- shadow economy
2.1.1 G)
What is national happiness used for
Used along side economic indicators to get a better idea of standard of living
2.1.1 G)
Key factors of UK national well being
GDP per capita
generosity
trust of absence of corruption
social support
perceived freedom
life expectancy
2.1.1 G)
relationship between real income and subjective happiness
Easterling paradox suggest life satisfactions does rice with income to a point where marginal gain derived from increase in income declines more money is needed for same increase in happiness
2.1.2 A)
What is inflation
Persistent increase in the general price level of prices over a period of time
2.1.2 A)
What is disinflation
falling rate of inflation, avg price ^ but to a slower rate , purchasing power v
2.1.2 A)
What is deflation
average price v, negative infation , prices are cheaper , purchasing power ^
2.1.2 B)
What is inflation rate
change in avg price in an economy in a period of time
2.1.2 B)
How can the UK calculate the rate of inflation
Consumer price index
2.1.2 B)
What are the steps of consumer price index
1) An expenditure survury
2)’consumer basket’ of most popular goods/servies with avg prices
3) prices are weighted based on % of income
4) weighted price are added to give the total weighted price of the basket
5) base year selected its given index value of 100
6)weighted basket converted into index number
7) % change calc done to work out annual inflation rates
8) basket updated annually
2.1.2 B)
index number calc
index number = (raw number / base year raw number) * 100
2.1.2 C)
Limitations of CPI
1) not fully representive for non typical households for example motering costs not appilied to houses w/o a car
2)spending patterns between people w/ w/o kids are diffrent
3) quality change in goods may rise the price not inflation
4) CPI slow to catch up to new products
2.1.2 D)
What is another measure of rate of inflation
rpi
2.1.3 A)
Define unemployment
those who are willing and able to work but cannot find a job despite searching
2.1.3 A)
What are the two measure of unemplyment
Claimant count & international labour org
2.1.3 A)
Explain claimant count
Measures the nuber of people claiming job seekers allowerance.
Requirments are more extensive then ILO so oftem lower
2.1.3 A)
Explain ILO
international labour org, and uk labour force suvery given to srandom sample of people if they fit the definiation of unemployment of ILO, can be inacc due to survery answers not 100% acc
ILO def - ready to work within two weeks and have activly looked for a job in the last month but cant find a job
2.1.3 A)
ADV / DADV of Clamiant count
A) EZ & cost efft
D_ changing critera, claimers may not seek work due to getting money, underestimate of unemployment
2.1.3 A)
ADV / DAVD of labour force survey / ILO
A) Allows for international comparision more acc
D) not representative of whole pop, Cost
2.1.3 B)
Underemployment is ?
when currently working but they are overqualified wjere their skill set are not fully utilised or they are willing to work more hours.
2.1.3 C)
Significasce of rate of employment
employment and unemployment can both rise
2.1.3 C)
What is the classification for Economically inactive
Age 16-64
not activly looking for a job may be due to long term sickeness or lack of motivation.
Inactive not counted as unemployment doesnt represent the problem associated with ^ in inactivity
^ unemployment = ^ inactive as in short run not finding a job leads to unmotivation long term moving from unemployed to inactive
2.1.3 )
Whats the labour force
Eq for unemployment
Employed + unemployed
unemployment = (# of unemployed / labour force )* 100
2.1.3 )
Who can claim JSA ( Job seekers allowance)
working < 16 hrs
unemployed and seeking working
not enrolled in full time education
2.1.3 D)
Explain structual unemployment
causes are geogpraphicwl immobility and occupated immobility
Geo - workers are unwilling to move in order to find work
opp - work either havibng no shifts or no longer needed
2.1.3 D)
Explain fractional unemployment
occurs between the time workers are unemployed and find new work
policies like edu and careers advice cab reduce fractional.
seasonal - some jobs only adv in certian seasons
2.1.3 D)
Explain demand deficency and cyclical unemployment
cyclical unemployment caused by v in AD as demand for labour dervies from demand for goods v dd = v employment.
leads to unemployment output to decrease and price to inc
notes for diagram
2.1.3 D)
Explain real wage inflexability
fixing wages above the Equalibrum rate ( min wage )
results in supply of labour being more than demand . casuses exsess supply of labour aka unemployment
(Diagram in notes )
this is because fixed wages doesnt allow eq to be reached so full employment is unattainable
real wage unemployment is tge diff between dd and ss of labour
2.1.3 E)
Significance of skills for employment
lack of skill impacts the ability of workers to switch field dependibg on needed and rate of employment
high rates of occupational unemployment cab cause unemployment and make long term jobs for ppl who dont get retrauned
2.1.3 E)
Significance of migration for employment
migation causes expainsion in work force ^ ss of labour
migrates normally willing to work for less due to standards
low wage workers more effected
^ migrates = ^ demand for labour / goods
2.1.3 F)
How are Consumers effected by unemployment
loss of income , v standard of living , ^ society issues (health, phy / mental )
2.1.3 F)
How are firms effected by unemployment
V dd/ss = V revenue, however worker may will be willing to work for less due to lack of jobs and v on overall costs
2.1.3 F)
How are workers effected by unemployment
^ levels of fractional unemployment makes ppl find the job right for them = ^ work time length and happniess, however if they lose their skills > long term unemployment. ineff for economy
2.1.3 F)
How are gov effected by unemployment
v tax renenue. reduction in consumption, v in VAT have to spend more on welfare ^ national debt , ^ opp cost of production by unemployment
2.1.3 F)
How are society effected by unemployment
^ crime and unhappniess, ^ neg externalties, unmotivated leads to econ unactive.
2.1.4)
What is the balance of payment
A record of all financial dealings over a period of time between econmic agents of one country and all other countries
2.1.4 A)
Components of the balance of payment
Current account , Financial & capital account
2.1.4 A)
Whats Current account
Records payment for the purchase and sale of goods and servies
made up of
trade in goods - difference between visible exports and visible imports
trade in servies - invisible can be export or import
2.1.4 A)
Whats financial & capital account
which records flow of money assicuated with saving investment specualtion and currency stabilsations
money in is + money out is -
2.1.4 A)
Whats income and current transfer
Wages, intrest profit or dividends can be repatriated into the country
Ex; making money in one country sending it back to others, usually done by govt.
2.1.4 A)
What are the two catorgories income and current transfer
Primary and secondary
2.1.4 A)
What is the primary income and current transfer
result of loans of the factor of production aboard ( intrest profit dividenders)
2.1.4 A)
What is the secondary income and current transfer
is a range mainly govt transfers to oversea org.
2.1.4 B)
Whats a current deficits and surplus
surplus export > imports pos current balance
deficit import > export neg current balance
2.1.4 C)
4 main marcoeconomic objects
low employment, low and stable inflation, economic growth and balance of payment eq
^ eg = current account = deficits as ^ import due to ^ dd
gov tends to want export led growth which causes eg high employment and improve the current account balance can cause inflation.
2.1.4 D)
How does international trade affect interconnectedness
- The proportion if output of an individual economy which is traded internationally is growing
- many more people own assets in other countries such as shares, loans busniess
- ^ migration
- ^ technology
internatinal trade has meant countries have become interdependent so a change in the one country will affect another
