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macro economics > 2.1 measures of economic performance and policies > Flashcards

2.1 measures of economic performance and policies Flashcards

1
Q

when does economic growth occur?

A

when there is a rise in the value of GDP

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2
Q

what does GDP measure?

A

the quantity of goods and services produced in an economy

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3
Q

what does higher economic output lead to?

A

-higher standard of living
-more employment opportunities

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4
Q

what is real GDP?

A

the value of GDP adjusted for inflation

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5
Q

what is nominal GDP?

A

the value of GDP without being adjusted for inflation
-can be misleading as it may make GDP seem higher than it actually is

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6
Q

what is total GDP?

A

the total monetary value of all goods and services produced within a country during a specific time period

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7
Q

what is GDP per capita?

A

the value of total GDP divided by the population of the country

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8
Q

what is volume of GDP?

A

-adjusted for inflation
-it is the size of the basket of goods and the real level of GDP

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9
Q

what is the value of GDP?

A

-the monetary value of GDP
-nominal figure
-volume x current price level

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10
Q

how can national income be measured?

A

-GNP (market value of all products produced in a year of all citizens of one country)
-GNI (the sun of value added by all producers who reside in a nation plus overseas interest and dividends)

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11
Q

what is purchasing power parity?

A

-a theory that estimates how much the exchange rate needs adjusting so that an exchange rate between countries is equivalent
-e.g £1 may equal $1.28

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12
Q

formula for measuring GDP

A

GDP = C + I + G + X - M

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13
Q

limitations of using GDP

A

-does not give any indication to the distribution of income
-may need to be recalculated in terms of purchasing power
-large hidden economies like the black market
-gives no indication of welfare

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14
Q

what are the six factors affecting national well being according to the UN happiness report?

A

-real GDP per capita
-health
-life expectancy
-having someone to count on
-perceived freedom to make life choices
-freedom from corruption and generosity

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15
Q

what is inflation?

A

the sustained rise in the general price level over time

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16
Q

what is deflation?

A

the average price level in an economy falls, negative inflation rate

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17
Q

what is disinflation?

A

-the falling rate of inflation, where average price level is still increasing but at a slower rate

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18
Q

calculating inflation rate

A

-consumer prices index
-a survey is used
-weighted basket of goods
-measured average price change of goods
-updates annually

19
Q

limitations of CPI

A

-not representative of everyone, not everyone buys the same things
-slow to respond to new goods and services
-changing quality of goods and services may effect price

20
Q

retail price index (RPI)

A

-alternative measure of inflation
-includes housing costs like mortgage interest and council tax
-excludes top 4% and low income pensioners
-doesn’t take into account that when prices rise people switch products

21
Q

causes of inflation

A

-demand pull inflation
-cost push inflation
-money supply

22
Q

demand pull definition

A

when aggregate demand rises, putting pressure on resources, therefore producers increase their prices

23
Q

cost push definition

A

when supplies become more expensive for the firm so they push up their prices for the consumer

24
Q

growth of money supply definition

A

bank of england print off more money, so more money flowing in the economy
-causing hyperinflation

25
Q

effects of inflation on consumers

A

-save more, consume less as interest rates are high
-purchasing power of money falls

26
Q

effects of inflation on firms

A

-less likely to invest as interest rates are high
-less price competitive on a global scale
-reduced business confidence

27
Q

effects of inflation on government

A

-will have to increase the value of state pension as cost of living is increasing

28
Q

effects of inflation on workers

A

-less disposable income
-firms may make more people redundant to cut costs

29
Q

measures of unemployment

A

-the claimant count
-the labour force survey

30
Q

what is the claimant count

A

-counts the number of people claiming unemployment benefits and they have to prove they are actively looking for work

31
Q

evaluating claimant count

A

-not every unemployed person is eligible for job seekers allowance
-those with partners on high incomes are not eligible even though they are unemployed

32
Q

labour force survey criteria

A

-been out of work for 4 weeks
-able and willing to start work in 2 weeks
-workers should be available for 1 hour per week including part time

33
Q

differnce between unemployed and underemployed

A

-unemployed are those able and willing to work but not employed. actively seeking work and looking to start within the next two weeks
-underemployed are those who have a job but their labour is not used to its full productive potential

34
Q

inactivity

A

-those who are not actively looking for jobs e.g the elderly, disabled or children

35
Q

structural unemployment

A

-caused by a long term decline in demand for goods and services in a particular industry
-workers don’t have transferable skills to move to another industry

36
Q

frictional unemployment

A

-the time between leaving a job and looking for another job

37
Q

seasonal unemployment

A

-occurs during certain points in a year, usually around summer and winter
-during summer more people will be employed in the tourist industry

38
Q

cyclical unemployment

A

-lack of demand for goods and services, usually occurs in periods of economic decline or recessions

39
Q

significance of migration and skills for employment and unemployment

A

-usually of working age and looking for a job so the supply of labour is likely to increase
-tend to bring high quality skills to the domestic workforce which increases productivity and skill set of the labour market
-high skilled work force is more employable

40
Q

exports

A

goods and services sold to foreign countries and are positive in the balance of payments as they are an inflow of money

41
Q

imports

A

goods and services brought from foreign countries and are negative on the bops as they are an outflow of money

42
Q

what is the balance of payments made up of

A

-the current account
-the capital account
-the official financing account

43
Q

what is a current account surplus

A

-there is a net inflow of money into the circular flow of income, the uk has a surplus with services but deficit of goods

44
Q

what are the governments macroeconomic objectives

A

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

macro economics (7 decks)

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