2.1.2 Macroeconomic Indicators

Question 1

What are the 4 variables to measure national economic performance?

Answer 1

1. Economic growth - GDP
2. Unemployment - “rate” or “level”
3. Inflation - CPI or RPI
4. Balance of payments - typically measured by net exports

Question 2

What is the trend rate of growth?

Answer 2

It is the rate of growth which can be sustained without generating any inflationary pressure.

Question 3

What is the positive output gap?

Answer 3

When the economy temporarily grows at a faster rate then the trend rate.

Question 4

What is the negative output gap?

Answer 4

When aggregate demand is growing at a slower rate.

Question 5

What are causes of unemployment?

Answer 5

1. People take time to change between different jobs
2. Employers require certain skills and characteristics
3. Increasing degree of technology used in the production process.

Question 6

What is labour productivity?

Answer 6

Labour productivity is output per worker per period of time

Question 7

What is capital productivity?

Answer 7

Capital productivity is output per unit of machinery / capital

Question 8

What is the current account?

Answer 8

• Primarily records all financial transactions made between the UK and other countries
• States how much is spent on imports and what the value of exports is