2.1 - measures of economic performance Flashcards
2.1.1
what is inflation?
-the rate of inflation is a sustained increase in the cost of living or the general price level leading to a fall in the purchasing power of money
what is economic growth?
-an increase in economic activity
-usually measured in GDP
-generally implies higher living standards
index number?
-shows a change in a no of costs
what is income?
- a flow of money going to the FOP
1 - wages and salaries
2 - money received from benefits
what is wealth?
-accumulation of scarce resources
-measures value of all the assets of worth owned by a person
circular flow of income?
- refers to the fact that income essentially flows from households to firms by purchasing goods/services and then back to households as wages
what happens when households consume more?
-level of economic activity increases and eventually greater returns are paid via higher wages
-more income can be ‘injected’
measuring economic growth?
GDP
gross domestic produce
3 ways of calculating GDP?
national output = national expenditure [AD] = national income
what do economist have to make a distinction between?
-nominal [actual number] and real [after inflation/price changed have been taken into account]
what does GDP measure?
-the value of goods produced here
what do we use to measure profit?
GNP
gross national product
GDP + net property income from abroad
eg dividends,interest,profit
net income?
-add income earned abroad and sent to the UK and subtract income earned in the UK and sent abroad
remittances?
-measured by subtracting and adding the flows
called gross national income - GNI
purchasing power parity?
-“basket of goods” approach
-compares price of a range of goods in the country adjusted for the exchange rates
-gives indication of relative levels of ‘real’ income
income inequality?
-the unequal distribution of income [ earnings ] or wealth [ net worth ] in a society
easterlin paradox?
-hence, a paradox as over time, ;omg term growth rates of happiness and income are not significantly related
-states that at a point in time happiness varies directly with income
[you are happier when you feel richer than others]
what is poverty?
-a state or condition in which a person or community lacks the financial resources and essentials for a certain standard of living
what is “absolute” poverty?
-a condition characterised by severe deprivation of basic human needs
what is “relative” poverty?
-when households receive 50% less than average household incomes
2.1.2 [inflation]
