4.2.1 measuring macro performance

Question 1

4 main macroeconomic objectives

Answer 1

economic growth
price stability
low unemployment
stable balance of payments

Question 2

what is gdp

Answer 2

total value of goods and services produced within a country in a year

Question 3

economic growth is

Answer 3

the rate if change of output

Question 4

calculate economic growth

Answer 4

difference in gdp/old gdp x 100

Question 5

what is real gdp

Answer 5

gdp accounting for inflation

Question 6

what is gdp per capita

Answer 6

gdp divided by population

Question 7

what is purchasing power parity

Answer 7

exchange rate of one currency for another which compares how much a typical basket of goods costs in one area compared to another

Question 8

real example of calculating PPP

Answer 8

big mac index

Question 9

4 limitations of gdp

Answer 9

doesnt account for hidden economy
doesnt account for unpaid/cash paid labour
doesnt reflect quality
ignores inequality

Question 10

fishers equation

Answer 10

M(money supply) X V(velocity of money) = P(price level) X T(transactions)

Question 11

who publishes cpi

Answer 11

office for national statistics

Question 12

what does cpi measure

Answer 12

average change moth to month in the prices of goods and services purchased by most uk households

Question 13

what if CPI is more than 1% above or below 2%

Answer 13

BoE governer will write to the chancellor of the exchequer to discuss monetary policy

Question 14

what is the RPI

Answer 14

same as CPI but includes housing prices such as mortgages and council tax, does not cover ALL households

Question 15

formula for RPI/CPI

Answer 15

new figure/base figure x 100

Question 16

3 limitations of CPI

Answer 16

not totally representative of costs
doesnt include housing
new measure so difficult to make LT comparisons

Question 17

2 measures of unemployment

Answer 17

claimant count (number of people caliming benefits)
labour force survey (questionairre given to a sample)

Question 18

issues with measures of unemployment (2)

Answer 18

may not claim benefits
may work for hidden economy

Question 19

confliciting objectives 5

Answer 19

inflation v unemployment
inflation v growth
growth v BoP
growth v budget
growth v environment

Question 20

what are index numbers

Answer 20

used to make comparisons between years, base year is used and others afre compared to this

Question 21

index of Y2

Answer 21

Y2/Y1 x 100

Question 22

index of Y1

Answer 22

100

Question 23

what are weighted indexes

Answer 23

reflect spending patterns
more representtative
used by HDI and price index

Question 24

4 issues with national income data

Answer 24

gdp does not illustrate distribution of income thus gdp per capita cannot accurately represent living standards
gdp alone doesnt account for purchasing power
hidden economies such as black markets are hard to account fot in gdp
gdp gives no indication of happiness/welfare