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Macro y12 > 2.1 - Measures of economic performance > Flashcards

2.1 - Measures of economic performance Flashcards

1
Q

What is GDP?

A

the value of all goods/services produced in a given time

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2
Q

Real GDP

A

figures with removed inflation (‘at constant prices’)

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3
Q

Nominal GDP

A

figures includes inflation

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4
Q

GDP equation

A

GDP ÷ population = per capita (removes population impact)

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5
Q

What is economic growth?

A

an increase or decrease in GDP over time

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6
Q

What is value?

A

price × quantity (revenue)

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7
Q

What is volume?

A

output at constant prices

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8
Q

What is PPP?

A

Purchasing Power Parity (PPP) - adjusts GDP to reflect what money can actually buy in different countries

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9
Q

GDP limitations

A
  • benefits of economic growth may only apply for a small proportion of the population
  • high GDP does not equal happiness for people
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10
Q

What is GDP? (compared to GNP)

A

regardless of nationality

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11
Q

What is GNP?

A

made by British people, regardless of location

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12
Q

What is the business cycle?

A

Economic/trade cycle, boom-bust cycle.
The rise and fall of economic activity

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13
Q

What is the balance of payments?

A

current account surplus = inflows > outflows
current account deficit = outflows > inflows

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14
Q

What is the current account?

A

trade and income transfers and current transfers

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15
Q

What are income transfers?

A

inflows and outflows of money to home countries

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16
Q

What are current transfers?

A

inflows and outflows of loans or grants

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17
Q

What are the UKs biggest imports? (outflows)

A

goods - oil, machines, minerals
services - tourism

18
Q

What are the UKs biggest exports?
(inflows)

A

goods - pharmaceuticals
services - financial services

19
Q

What are the 4 sections of the Current Account?

A

1) Trade in goods - imports and exports (net trade)
2) Trade in services - invisible, tangible goods
3) investment and employment income (primary income)
Investment income - Interests, Profits, Dividends (IPDs)
Employment income - wages being sent in and out
4) Transfers (secondary income) - gov transfers overseas EU

Each section has its own balance, which combine to give the overall value of the current account

20
Q

What is unemployment?

A

currently out of work, actively seeking

21
Q

Underemployment

A

have a job, but want to work more

22
Q

Effects of unemployment

A
  • increased of unemployment -> decrease AD -> low growth
  • adversely affects people’s psychological wellbeing
  • government decreases tax revenue, needs to increase GS on welfare
23
Q

What are the 2 measures of unemployment?

A

ILO measure and the Claimant Count

24
Q

What is the ILO measure?

A
  • International Labour Organisation
  • survey of 80,000 individuals
  • reduces claimant count
  • unemployment as a percentage (%) of labour force
25
Q

What is the Claimant Count?

A

How many people claim jobseekers allowance in a given period of time

26
Q

Types of unemployment

A

Structural, frictional, seasonal, cyclical (demand defficient), classical

27
Q

Structural unemployment

A

when workers don’t have the right transferable skills

28
Q

Frictional unemployment

A

workers are moving between jobs

29
Q

Seasonal unemployment

A

demand for a good/service is low at a certain time of the year (E.g: Tourism)

30
Q

Cyclical unemployment

A

lose jobs due to slow in economic growth (demand defficient)

31
Q

Classical unemployment

A

when supply of labour does not adjust to decrease in demand for labour
Wages stay high -> unemployment

32
Q

What is inflation?

A

increased cost of living/ general price level over time

33
Q

What is deflation?

A

prices actually fall (negative inflation rate)

34
Q

What is disinflation?

A

decrease inflation rate, increase prices at a smaller rate

35
Q

What is hyperinflation?

A

large increases in price level

36
Q

Causes of inflation

A

1) Demand pull
2) Cost push
3) Growth of money supply

37
Q

Measures of inflation

A

RPI and CPI

38
Q

What is the RPI?

A

Retail Price Index - includes housing costs and uses arithmetic mean, gives a higher estimation of inflation

39
Q

What is the CPI?

A

Consumer Price Index - ‘basket’ of everyday goods, however prices could change in quality, increase in substitutes and temporary shocks to inflation figures

40
Q

What are the effects of inflation?

A

• Creates uncertainty -> consumers decrease spending -> Decrease AD
• Loss of international competitiveness -> exports decrease
• savings are now worth less - people on fixed incomes will see a decrease in PPP
• Menu costs - firms need to update all prices
• shoe leather costs - consumers will have to spend more time and energy trying to find cheaper options

Macro y12 (8 decks)

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