2.1 Measures Of Economic Performance

Question 1

What does GDP measure

Answer 1

The quantity of goods and services produced in an economy

Question 2

What is real GDP?

Answer 2

The value of GDP adjusted for inflation

Question 3

What is nominal GDP?

Answer 3

The value of GDP without being adjusted for inflation

Question 4

What is total GDP?

Answer 4

The combined monetary value of all goods and services produced within a country at a specific period of time

Question 5

What is GDP per capita?

Answer 5

The value of GDP divided by the population of the country.

Question 6

What is volume of GDP?

Answer 6

GDP adjusted for inflation.

Question 7

What is value of GDP?

Answer 7

The monetary value of GDP at prices of the day.

Question 8

What is gross national product (GNP)?

Answer 8

The market value of all products produced in a year by the labour and property supplied by citizens of one country.

Question 9

What is gross national income(GNI)?

Answer 9

The sum of value added by all producers who reside in a nation, plus net overseas interest payments and dividends.

Question 10

What is purchasing power parity(PPP)?

Answer 10

The theory that estimates how much the exchange rate needs adjusting, so that an exchange rate between countries is equivalent.

Question 11

What are the limitations of using GDP to compare living standards between countries overtime?

Answer 11

1)GDP does not give any indication of the distribution of income.
2)GDP may need to be recalculated in terms of purchasing power, so it can account for price differences.
3)there are large hidden economies, such as the black market, which are not accounted for in GDP.
4)GDP gives no indication of welfare.

Question 12

Five factors affecting national wellbeing?

Answer 12

1)real GDP per capita
2)health
3)life expectancy
4)freedom of choice
5)freedom from corruption

Question 13

What is inflation?

Answer 13

Inflation is the sustained rise in the general price level overtime.

Question 14

What is deflation?

Answer 14

Deflation is where the average price level in the economy falls.

Question 15

What is disinflation?

Answer 15

Disinflation is when the average price level is still rising, but to a slower extent.

Question 16

How is the inflation rate measured in the uk

Answer 16

The Consumer Price Index(CPI)

Question 17

What are the 3 causes of inflation

Answer 17

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

Question 18

What is demand pull inflation?

Answer 18

When aggregate demand grows unsustainably, producers increase their prices to earn more profits

Question 19

What is cost push inflation?

Answer 19

This is when firms increase their prices as cost of production increases.

Question 20

What are the two main measures of unemployment in the UK?

Answer 20

1)The claimant count
2)The labour force survey

Question 21

How does the claimant count method measure unemployment

Answer 21

This measures the number of people claiming unemployment related benefits.

Question 22

How does the labour force survey measure unemployment?

Answer 22

A sample of people living in households

Question 23

What is unemployment?

Answer 23

The unemployed are those able and willing to work, but are not employed.

Question 24

What is underemployment?

Answer 24

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

Question 25

What are the 4 types of unemployment?

Answer 25

1)structural unemployment 2)frictional unemployment 3)seasonal unemployment 4)cyclical unemployment

Question 26

What is structural unemployment?

Answer 26

When workers do not have transferrable skills to move to another industry and there has been a long term decline for the goods and services in that industry.

Question 27

What is frictional unemployment?

Answer 27

This is the time between leaving a job and looking for another job.

Question 28

What is seasonal unemployment?

Answer 28

A situation where workers are unemployed at certain times of the year due to there only being high demand in some industries at certain times of the year.

Question 29

What is cyclical unemployment?

Answer 29

When there is lack of demand for goods or services so firms are either forced to close down or make workers redundant, due to their profits falling.

Question 30

What are exports?

Answer 30

Goods and services sold to foreign countries, and are positive in the balance of payments. Because it’s an inflow of money.

Question 31

What are imports?

Answer 31

Goods and services bought from foreign countries, they are negative on the balance of payments. They are an outflow of money.

Question 32

What is the balance of payments made up of?

Answer 32

-The current account -The capital account -The official financing account

Question 33

What is the current account on the balance of payments?

Answer 33

The balance of trade in goods and services.

Question 34

What is a current account surplus?

Answer 34

There is a net inflow of money into the circular flow of income.

Question 35

What is a current account deficit.

Answer 35

This means you spend more on imports from foreign countries, than they earn from exports to foreign countries.

Question 36

The government’s macroeconomic objectives are to have:

Answer 36

-full employment -low, stable inflation -a sustainable current account on the balance of payments -sustainable economic growth

Question 37

What is the effect of unemployment on workers?

Answer 37

Those made unemployed have a loss of income which usually results in a decline of living standards.

Question 38

What is the effect of unemployment on firms?

Answer 38

Decrease in demand for their goods(YED) and so this could lead to a fall in profits. They can offer low wages as people will take the job anyway as they know there is a lack of jobs so have few options.

Question 39

What is the effect of unemployment on consumers?

Answer 39

The unemployed lose out as they have less available to spend.

Question 40

What is the effect of unemployment on the government?

Answer 40

The reduced income results in a fall in tax revenue and higher spending on welfare payments for families with people out of work?