2.1 measuring economic performance

Question 1

define inflation

Answer 1

the change in cost of a product from one year to the next

Question 2

define recession

Answer 2

wherein the GDP is negative for two quarters in a row // negative growth

Question 3

define macroeconomics

Answer 3

the study of the whole economy which considers large scale generic issues such as unemployment, interest rates and poverty.

Question 4

define GDP

Answer 4

gross domestic product. The value of goods and services produced in the economy over a period of time

Question 5

define real GDP

Answer 5

The value of goods and services produced in the economy over a period of time taking into account inflation

more accurate portrayal on the whole

Question 6

define nominal GDP

Answer 6

The value of goods and services produced in the economy over a period of time NOT taking into account inflation

Question 7

Gross National Income (GNI)

Answer 7

its total level of income

Question 8

limitations of GDP or GNI

Answer 8

jobs in low income countries are more likely to be informal hence wont have a financial record

Question 9

define the volume of a country

Answer 9

looks at the quantity of goods and services produced in a country

Question 10

define the value of a country

Answer 10

looks at the monetary worth of the goods and services produced in a country

Question 11

how is purchasing power parties useful

Answer 11

is a method that allows us to look at the relative value of different currencies.

real GDP / the number of people within the country.
converts the income into dollars to allow a comparison between all countries around the world.

This allows us to see how much an individual from each country can purchase given the average amount of income that they have

Question 12

what is happiness economics & why is it studies

Answer 12

a fairly new branch of economics that looks at how content individuals are with their life from a theoretical and scientific viewpoint .

There is a clear relationship between real income and subjective happiness e.g. being in debt can be demoralising but there are other factors to take into account

Question 13

how is national happiness measured

Answer 13

by a UN world happiness report

measures
freedom from corruption
freedom to make choices
life expectancy
real GDP per capita

Question 14

what is inflation

Answer 14

a persistent rise in the general price level of an economy over a period of time.

Question 15

what is purchasing power

Answer 15

the value of a currency expressed in terms of the number of goods or services that one unit of money can buy

Question 16

how is purchasing power measured in the UK

Answer 16

retail price index

Question 17

how is inflation measured in the UK

Answer 17

consumer price index

basket of goods which prices are compared to that of a year ago

Question 18

3 causes of inflation

Answer 18

demand pull - when there is a shortage, demand > supply

cost push - when firms face rising costs of production

growth of money supply

Question 19

define deflation

Answer 19

recessions; decreasing prices; decreases investment

the overall decrease in the cost of an economy’s goods and services

Question 20

cost push

Answer 20

Cost push inflation occurs when firms face rising costs of production from wages or raw materials

Question 21

demand pull

Answer 21

When the demands for goods & services in an economy exceeds the available supply aka there becomes a shortage. Thus firms raise prices as a means of restricting demand and increasing profits.

Question 22

the official measure of inflation in the UK

Answer 22

consumer price index
measures how the price of goods & services changes over time
using the basket of goods