2.1 measures of economic performance - definitions Flashcards
Gross Domestic Product (GDP)
The total value of goods and services produced in an economy over a period of time.
Economic Growth
The rate of increase of actual real GDP or an increase in the productive capacity of the economy.
GNI
The Gross Domestic Product plus the NET income earned abroad.
Nominal values
The value of an economic variable based on current prices – prices today, which takes no account of changing prices over time.
Real values
The value of an economic variable taking account of changing prices over time.
GDP or GNI per capita
GDP or the GNI of a country divided by its population: the GDP/GNI per person.
Purchasing Power Parity
Adjusting GDP or other variables to reflect how much the local currency actually buys you, or the purchasing power of the country.
Real incomes
Incomes after rising prices (inflation) is taken into account.
Subjective wellbeing
How happy or content people feel, based on your own personal judgment.
Inflation
A rise in the overall or average price level. Calculated as the % change in the CPI or RPI over a year. Target of 2% per year.
Deflation
When the overall price level falls instead of rises. This would be expressed as a negative inflation number, e.g. -2%
Disinflation
When the rate of inflation falls – but it is still positive. Prices are still rising, but at a slower rate.
Consumer Price Index
A measure of the average level of prices in the UK, based on a representative ‘basket’ used by the Government and Bank of England
Household Consumption Expenditure Survey.
The first survey you need to calculate CPI inflation. You need a ‘representative basket of goods and services’. Government does a survey of nearly 7000 households’ spending habits.
Weightings
Goods or services that people spend a lot of their money on will have a higher weighting. E.G., Electricity bills and housing cots will have a large weighting
Demand -Pull
Inflation that is caused by a rise in Aggregate Demand. People are spending more and firms might not be able to increase production quickly enough (‘Bottlenecks’).
Cost-Push
Inflation caused by rising costs. Higher costs will make it harder for firms to produce. Costs could get passed on to consumers as higher prices, so inflation rises.
Claimant Count
The number of people claiming benefits for unemployment - the Jobseeker’s Allowance or JSA in the UK.
Labour Force Survey (ILO)
An interview-based survey of about 60,000 households. It includes all people over 16 and is a better measure than the claimant count.
Underemployment
Where someone does not have as much work as they would ideally like or working in a job that does not use your skill level.
Economic Inactivity
People who are of working age but are NOT currently seeking work for a variety of reasons (childcare, retirement, full-time study). If you are economically inactive you are NOT part of the workforce,
Structural unemployment
Unemployment caused by the changing structure of the economy. For example when a country like Britain loses jobs in manufacturing
Cyclical unemployment
Unemployment that is caused by the economic cycle. When you have a negative output gap, AD is falling, there is spare capacity and so there is not enough demand to create enough jobs.
Seasonal unemployment
Unemployment at different points in the year. For example when unemployment rises in a tourist destination during the winter months.
Frictional unemployment
Unemployment caused by people moving between one job and another. It isn’t a necessarily a problem - people need to move jobs, so it is a sign of a healthy labour market.
Discouraged workers
People who have been unable to find work for a very long time, so they have stopped looking. They become economically inactive, so they may not show up on unemployment measures.
Balance of Payments
(B of P)
A set of accounts showing the transactions between residents of a country and the rest of the world – sets out exports, imports and flows of money.
Current Account
a) the value of imports and exports of goods and services b) net income payments received from/paid to abroad and c) government transfers (international aid or money we pay to the European Union).
Financial Account
The Financial Account includes any trade of Foreign Exchange reserves as well as the buying and selling of assets held in different countries.
Balance of Trade
Just the value of exports minus value of imports of physical goods as well as invisible services.
