Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > 2.1 Measuring economic activity > Flashcards

2.1 Measuring economic activity Flashcards

1
Q

How man sectors are there in a closed and simple economy

A

Household and firms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What does it mean if it is a simple economy

A

no government intervention

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does it mean if it is a closed economy

A

no foreign sector

no exports and no imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Four factors of production

A

labour, capital, land and enterprise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the output flow

A

households give factors of production to the firms and firms use them to produce the output of good and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Income flow

A

Land - rent
Labour - wages
Capital - Interest
Enterprise - Profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Expenditure flow

A

household have expenditure on goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What do you assume in a simple and closed economy

A

households spend all income they earn
no foreign markets
no savings and no investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are leakages

A

Savings
Import expenditure
Taxes

SIT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are injections

A

Government spending
Investment
export expenditure

GIE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what do injections add to

A

the expenditure flow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what do leakages add to

A

the income flow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what are in a complex and open economy

A

Financial sector - savings and investment
government sector - taxes and government expenditure
Foreign sector - exports and imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What does it mean if the sum of all leakages > sum of all injections

A

Savings + taxes + import expenditure > investment + government spending + exports

Circular flow of income will decrease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What does it mean if the sum of all leakages < sum of all injections

A

Imports, savings and taxes < exports, government spending and investment

The circular flow of income will increase

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What should happen in an equal economy in theory

A

the output flow, income flow and expenditure flow should equal each other

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How is national income measured

A

GDP = gross domestic product

Three different methods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Different methods of measuring GDP

A

The output method

The income method

The expenditure method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the output method

A

sum of all the value added all the firms in the economy

deduct the cost of inputs

defines GDP as the ‘total monetary value of all the final goods and services produced within an economy in a year

national output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are the different production sectors int he economy

A

Agriculture and mining (primary sector)

Manufacturing (secondary sector)

Services (tertiary sector)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the income method

A

measures the value of all the incomes earned in the economy

GDP = wages + interest + rent + profit = national income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the expenditure method

A

Measures the value of all the spending on goods and services in the economy

Calculates by summing up the different factors
Consumption + investment + Government spending + foreign exports minus imports

C + I + G + (X - M) = national expenditure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the expenditure method

A

Measures the value of all the spending on goods and services in the economy

Calculates by summing up the different factors
Consumption + investment + Government spending + foreign exports minus imports

C + I + G + (X - M) = national expenditure

23
Q

In theory what should be said about GDP

A

National output = national income = national expenditure

However, there are some inevitable inaccuracies in practice.

24
Q

What is GNP/GNI

A

The gross national product/Gross national income

the total income that is earned by a country’s factors of production regardless of where the assets are located

25
Q

What is GDP

A

the total of all economic activity in a country regardless of who owns the productive assets

26
Q

What is the difference between GDP and GNP

A

GDP is within a certain location

GNP is decided by nationality no matter where they are located

27
Q

How do you calculate GNI

A

GNI = GDP + (income earned from assets abroad - income paid to foreign assets operating domestically

GNI = GDP + net property income from abroad

28
Q

What is inflation

A

a rise in the general price level across the economy

29
Q

What is real GDP

A

Nominal GDP adjusted for inflation

30
Q

What is a problem with comparing GDP over time

A

calculations overstate the value of GDP because of inflation

GDP measured at current prices is the nominal GDP so Real GDP can be used instead

31
Q

How do you calculate GDP price deflator

A

GDP price deflator

100 + interest rate/ 100 x 100

32
Q

How do you convert nominal GDP to real GDP

A

Real GDP = Nominal GDP/GDP deflator x 100

33
Q

What is the difference between total GDP and GDP per capita

A

Total is the total GDP or total GNI/GNP

measures total economic activity of a country

Per capita is the total/ size of a population and measures standard of living of a country

per capita is more appropriate for comparing between countries in terms of standards of living

34
Q

Why is national income statistics beneficial

A
  1. a useful indicator of standard of living - real GDP per capita
  2. Useful for making comparisons over time - real GDP and economic growth
  3. Useful for making comparisons between countries - real GDP per capita
  4. serves as a report card about the performance of economy - economic growth, government policy, objectives and adjistments
35
Q

Why is national income statistics beneficial

A
  1. a useful indicator of standard of living - real GDP per capita
  2. Useful for making comparisons over time - real GDP and economic growth
  3. Useful for making comparisons between countries - real GDP per capita
  4. serves as a report card about the performance of economy - economic growth, government policy, objectives and adjistments
36
Q

What are disadvantages of national income statistics

A
  1. Does not reflect distribution of income and wealth - measures the total but h=not how much everyone gets
  2. Does not show differences in the cost of living
  3. Does not reflect extent of social welfare benefits and the variations between countries
  4. Fluctuating exchange rates make international comparisons of GDP over time less accurate and less meaningful
  5. DO not reflect the composition of national output - USAs very large penguin on military technology compared to Europes very large spending on welfare benefits
  6. Does not account for negative externalities generate sin producing this national output - pollution, noise, stress, environmental destruction (Green GDP is more common nowadays, measures the GDP that accounts of environmental destruction)
  7. Does not account for size of the informal economy - unofficial production of goods and services - DIY, goring own food (developing countries)
  8. May be useful in measuring standard of living but not really useful indicator of quality of life - growth vs development.
37
Q

What does the business cycle show

A

described the short-term fluctuations in economic activity in a country over time which creates a long term trend of growth in the economy

38
Q

what are the four parts of the business cycle

A

recession
trough
recovery
boom

39
Q

What are the axis of the business cycle

A

shows the relationship between the real GDP (dollars usually) over time

40
Q

What is a recession

A

the fall in GDP that lasts over two or more consecutive quarters

during a recession, Consumption spending, investment and net exports gradually fall

unemployment gradually rises

business and consumer confidence levels gradually fall

41
Q

What is a trough / slump

A

occurs at the bottom of a recession in the business cycle

Consumption, investment and net exports are low
unemployment is high
business failures are common and consumer confidence levels are low
Government may ride to help economy recover from the recession

during this it is a period of contraction

42
Q

What is a recovery

A

Real GDP begins to rise, and the economy begins to recover from a slump/trough

Consumption + investment + net exports gradually rise
more employment opportunities are created, unemployment falls

it is a period of expansion in economic activity

43
Q

What is a boom

A

the peak of the business cycle
economic activity is at its highest level, economic growth rises

unemployment is very low

business and consumer confidence levels are high

often there is inflation

Consumption, investment, government and net exports are usually high as well

this is the end of the expansion phase, a short term fluctuation

44
Q

What are recession, troughs, recoveries and booms

A

they are short term fluctuations

45
Q

what is the long term trend in a business cycle

A

The potential output, or potential GDP of the economy

  • economic growth increases the long-term productive capacity of the economy - shifts the PPC outwards
  • exogenous shocks like infections diseases, natural disasters, like earthquakes, global financial crises, can all negatively affect the potential growth of an economy
46
Q

what is the general assumption of the long term trend of the economy

A

assuming there are no exogenous shocks, the long term trend is expected to be in a trend of growth in an increase in GDP over time

47
Q

Distinguish between a fall in GDP and a fall in GDP growth

A

Fall in GDP causes a recession if it occurs over two consecutive quarters

A fall in GDP growth means the economy is still growing but at a sower rate than before

48
Q

Advantages of GDP

A
  • allows for comparison
  • informs policy makers
  • gives indication of average income
49
Q

disadvantages of GDP

A
  • overestimates the quality of life
  • does not account for disparity in income distribution
  • contains inaccuracies
  • does not account for improvements in quality of output
50
Q

What doe PPP tell us

A

the size of an economy by its power to purchase goods and services within that country.

51
Q

Alternate measures of well-being

A 
World happiness report
OECD better life index
Gross national happiness 
Happy planet index 
Green GDP
52
Q

What is the world happiness report

A

used as an indicator of people’s happiness in the measures of economic development. Measured using the cantorial ladder where they rate their happiness

53
Q

What is the OECD better life index

A 
measures 11 indicators:
housing
income
jobs
community
education
environment
civic engagement
health
life satisfaction
safety
work-life balance
54
Q

What is the gross national happiness

A

looks at many other different aspects that are said to be equally as important

55
Q

What is the happy planet index

A

uses four indicators to demonstrate how effieicnetly residents of different countries are suing environmental resources to lead long happy lives

wellbeing x life expenstancy x inequality of outcomes /
ecological footprint

Economics (35 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions