4.2.1 The measurement of macroeconomic performance Flashcards
What is the government target for Economic Growth?
Sustainable Economic Growth
Target Real GDP growth of 2%
What is the government target for Employment?
As close to full employment as possible.
(they account for frictional unemployment by aiming for around 3% unemployment)
What is the government target for inflation?
Low and stable
Target of 2% (+/- 1% accepted)
What is the government target for BoP?
Not a large deficit, close to equilibrium (current account)
What other additional objectives may the government target?
- Balanced gov. budget (controlling national debt)
-Reduced income and wealth inequality
Why can all 4 economic objectives not always be achieved?
The importance of each objective can change, the government have to make trade offs.
e.g Economic Growth vs Inflation
What is Real GDP?
Measures the quantity of goods and services produced in an economy (national output), with the value adjusted to inflation
What is Real GDP per Capita?
The value of Real GDP divided by the population. Measures average output per person in an economy.
What is CPI?
Consumer Price Index - A measure of Inflation
Measures household purchasing power with the Family Expenditure Survey. A basket of
goods is created and the goods are weighted according to how much income is spent on
each item. (e.g Petrol higher than tea)
What is RPI?
An alternative method, which takes into account housing costs, such as payment on mortgages and council tax.
What are the two measures of Unemployment?
The Claimant Count - number of people claiming unemployment benefits such as JSA
Labour Force Survey-
Asks questions on economic activity, past and present along with qualifications
What is the Balance of Payments?
A record of all financial transactions between one country and another, involving the value of imports and exports.
Made up of
- The current account
- The Capital account
- The official financing Account
What are index numbers and how are they calculated
Used to make comparisons between years, and to measure magnitude of change over time. A base year is used to do this.
E.g if inflation rose by 5% from 2015 to 2018, the index would rise from 100 to 105.
What are 4 limitations of national income data, when comparing living standards between countries?
- GDP doesn’t account for income distribution (inequality)
- Recalculate for Purchasing Power, due to different cost of living internationally
- Large hidden economies e.g Black Market
- GDP gives no indication of Welfare
What is National Income?
The level of total output in an economy is called National Income (GDP)
