4.2.1 Measurement Of Macroeconomic Performance

Question 1

What are the main macroeconomic objectives?

Answer 1

• Economic growth
• Low unemployment
• Stable inflation
• Balance of payments
• Income distribution
• Economic stability

Question 2

What does “every umbrella in Britain is essential” stand for?

Answer 2

• Economic growth
• Low unemployment
• Stable inflation
• Balance of payments
• Income distribution
• Economic stability

Question 3

How is balance if payments calculated?

Answer 3

Exports-Imports=Balance of Payments

Question 4

What is the GDP?

Answer 4

(Growth Domestic Product) amount spent on goods and services each year

Question 5

What is a policy conflict?

Answer 5

Where macroeconomic objectives are incompatible. It may be that an action to improve performance in one area will damage another objective

Question 6

What are lead indicators?

Answer 6

They provide information about the future state of the economy e.g surveys on consumer

Question 7

What are log indicators?

Answer 7

They provide information about the past/ current economic performance e.g. data on unemployment

Question 8

What are some indicators of a country?

Answer 8

• inflation rate
• unemployment rate
• GDP per capita
• people per doctor
• life expectancy
• % of people with qualifications

Question 9

What is Economic growth?

Answer 9

A period of time when the output of an economy is increasing, shown by an increase in GDP

Question 10

What is nominal GDP?

Answer 10

GDP measured at current market prices without the effects of inflation

Question 11

What is real GDP?

Answer 11

A measure of all goods and services in an economy, adjusted for price change or inflation

Question 12

What is GDP per capita?

Answer 12

GDP divided by population

Question 13

What are index numbers?

Answer 13

A figure reflecting price or quantity compared with a base year. Base year is given a value of 100

Question 14

How are index numbers calculated?

Answer 14

(Current price/base price)x100

Question 15

What is price stability?

Answer 15

The constant fluctuation of prices due to inflation targeted at 2%

Question 16

What is the target for unemployment?

Answer 16

3% to account for frictional unemployment

Question 17

What are examples of policy conflicts that can occur?

Answer 17

• economic growth vs inflation
• economic growth vs the current account
• economic growth vs government budget deficit
• economic growth vs the environment
• unemployment vs inflation

Question 18

How is inflation measured?

Answer 18

CPI or RPI

CPI= Consumer price index which measures household purchasing power with the family expenditure survey and from this a basket of goods is created

RPI= Retail price index same as CPI but includes house costs so tends to be higher

Question 19

How is unemployment measured?

Answer 19

The claimant count- number of people claiming benefits

UK Labour Force Survey- must be out of work for 4 weeks, able to start work in two weeks and part time unemployment is counted

Question 20

Whet is the balance of payments made up of?

Answer 20

• the current account
• the capital account
• the financial account

Question 21

Positives of national income data

Answer 21

• can show improvements in living standards from higher economic growth
• shows trend output of an economy over time
• GDP per capita measures GDP per head

Question 22

GNP

Answer 22

Gross National product

The market value of all products produced in a year by the labour and property supplied by the citizens of one country

Question 23

GNI

Answer 23

Gross National Income

The sum of value added by all producers who reside in a nation

Question 24

Limitations of National Income data

Answer 24

• doesn’t show distribution of wealth
• GDP may need to be recalculated in terms of purchasing power to be easier to compare
• there are large hidden economies such as the black market which aren’t included in GDP
• GDP gives no indication of welfare