2.1 Measures of economic performance

Question 1

What is Gross Domestic Product?

Answer 1

GDP- The total value of goods and services produced in a country within a year

Question 2

What is real GDP?

Answer 2

Real GDP strips out the effects of inflation

Question 3

What is nominal GDP?

Answer 3

GDP with the effects of inflation

Question 4

What is economic growth?

Answer 4

The rate of change of output - increase in the long term productive potential of a country

Question 5

What is GNI?

Answer 5

Gross National Income - The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends

Question 6

What is GNP?

Answer 6

Gross national product - the value of goods and services over a period of time through labour and property supplied by citizens of a country both domestically and overseas

Question 7

What are purchasing power parities?

Answer 7

An exchange rate of one currency for another and compares how much a typical basket of goods costs in one country compared to another

Question 8

Problems of using GDP to compare standards of living

Answer 8

Inefficient at collecting or calculating data
The hidden market - people don’t declare their taxes so some incomes aren’t taken into account

Question 9

Other problems of using GDP to compare standards of living

Answer 9

Inequalities
Quality of good and services
Spending

Question 10

What is national happiness?

Answer 10

Societal and personal well-being beyond what an economy produces

Question 11

What is inflation?

Answer 11

The general increase of prices in the economy

Question 12

What is defaltion?

Answer 12

The fall of prices

Question 13

What is disinflation?

Answer 13

A reduction in the rate of inflation

Question 14

3 causes of inflation

Answer 14

Demand pull
Cost push
Growth of money supply

Question 15

What is demand pull inflation?

Answer 15

An increase in AD causes inflation to rise as a shift causes a change in price

Question 16

What is cost push inflation?

Answer 16

A decrease in AS may push prices up

Question 17

What is growth of money supply inflation?

Answer 17

Too much money in the economy, if people have access to money they are going to spend it so if there is no change in supply then prices will have to rise

Question 18

Effects of inflation on consumers

Answer 18

Less to spend which may mean a fall in living standards
Psychological effects as consumers may think they have less to spend

Question 19

Effects of inflation on firms

Answer 19

British goods may becomes more expensive making them less competitive
Makes it hard to plan for the future

Question 20

Effects of inflation on workers

Answer 20

If workers do not receive yearly pay rises of the rate of inflation, they will be worse off and their living standards will decrease.

Question 21

Measures of unemployment

Answer 21

Claimant count: the number of people receiving benefits
International Labour Organisation survey

Question 22

What is the employment rate?

Answer 22

The percentage of the population of working age who are employed

Question 23

What are the 5 types of unemployment?

Answer 23

Frictional
Structural
Seasonal
Cyclical
Real wage

Question 24

What is structural unemployment?

Answer 24

When a worker has a lack of skills and stops them from being employed

Question 25

What is frictional umemployment?

Answer 25

When a employee is in between jobs

Question 26

What is seasonal unemployment?

Answer 26

Due to seasons in industries like tourism, people are forced out of their jobs

Question 27

What is cyclical unemployment?

Answer 27

Unemployment due to a lack of demand of goods and services within a country Follows the trade cycle

Question 28

What is real wage unemployment?

Answer 28

When wages are set above the equilibrium level resulting in an excess supply of labour or unemployment

Question 29

Impacts of unemployment on governments

Answer 29

Fall in tax revenue and higher spending on welfare payments Budget deficit

Question 30

Unemployment impacts of society as a whole

Answer 30

Social deprivation - leading to crime and social dislocation

Question 31

What is the balance of payments?

Answer 31

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

Question 32

What are the components of the balance of payments?

Answer 32

Current account Capital account Financial account

Question 33

What are the components of the current account?

Answer 33

Balance of trade in goods Balance of trade in services Net income from abroad Net current transfers

Question 34

When is there a current account surplus?

Answer 34

Where exports are greater than imports so the current balance is positive

Question 35

When is there a current account deficit?

Answer 35

Where imports are greater than exports so the balance is negative