4.2.1.2 - macroeconomic indicators Flashcards
Define short run growth
the actual annual percentage change in real national output.
Define long run growth
an increase in the potential productive capacity of the economy.
Define macroeconomic indicators
a statistic used to represent the achievement of a macroeconomic objective
List the 10
macroeconomic indicators
- real and nominal GDP
- GDP per capita
- CPI
- RPI
- Claimant count
- labour force survey
- productivity
- budget balance
- debt as a % of GDP
- balance of payments
Define GDP
Gross Domestic Product: The value of goods/services producer in the economy over a period of time
3 ways in which GDP is measured
- national expenditure
- national income
- national output
Define national expenditure
consumption + Investment + government spending + net exports (exports - Imports)
Define national income
Total of all incomes within an economy
National output
The value of all outputs from the main economic sectors
One strength of using real gross domestic product
The most accurate and reliable method of measuring macroeconomic performance
Define norminal GDP
The value of goods and services produced in an economy expressed in monetary term(current prices). It doesn’t take into account inflation.
Define real gross domestic product
the value of goods/services produced in the economy over
a period of time taking into account inflation
Equation to calculate the real GDP
[ index of comparison period( base year) / index of current period ] x nominal value
Why is GDP per capita useful
Allows comparisons to be made between countries in terms of the standard of living in each country.
What is the difference between GDP measured by volume or by value.
Value: the monetary worth of the goods and services produced in a country
Volume: the quantity of goods and services produced in a country.
What are the two calculations that measure inflation
- Consumer price index (CPI)
- The Retail Prices Index (RPI)
How is CPI calculated
- a base year is selected and a survey on the average household spending habits is carried out
- a representative basket of goods is used which is reviewed each year to reflect consumer spending patterns.
- Weightsareattachedtoeachitembasedontheir importance in people’s spending
- allowing the rate of inflation to be calculated
What is CPIH
The consumer price index plus housing costs
- it displays the level of inflation when including the amount you have to pay to rent a property ( costs and council tax)
What is included in the RPI
- includes the factors of CPI plus mortgage interest repayments and council tax
- it excludes the top and bottom 4% of the country as they don’t represent the average household
- it tends to be a higher value than the CPI
Why is RPI no longer used as frequently
- the mortgage payment figure began to distort the figure
- RPI has now been replaced by the CPIH
How is unemployment measured
-Claimant Count
-The labour force survey
How is the claimant count calculated
The number of people that receive welfare benefits for unemployment
How is the labour force survey calculated
It is a figure based on a monthly survey of people who report that they are looking for work but cannot find it
- whether they receive benefits or not is irrelevant for this measure
- it is used to estimate the national unemployment level
What does productivity measure
how efficiently production inputs (the factors of production) produce a given level of output
What is the equation for productivity
- total output / no. Of units of input
( units of input include: labour, capital, hours etc.. )
What is labour productivity
Measures the average output of each worker.
What is capital productivity
Measures the efficiency of the machinery or equipment
What’s is balance of payments
A record of a country’s trade and transactions with the rest of the world (imports and exports)
What are the three sections to the balance of payments
- the current account
- the financial account
- the capital account
Define the current account
Look at the net income flows of a country earned by either trade in goods/services, rewards from investment or international transfers.
What is the balance of trade
Exports - imports
What is a surplus and deficit of trade
Surplus = exports Greater than imports
Deficit = exports Smaller than imports
What is the uks balance of the trade of goods
- LARGE DEFICIT on the trade of goods, due to:
- increase in demand for consumer goods that need to be imported
- a decline in the uk manufacturing sector
- lower production of primary materials such as gas and oil
What is the measure of the trade in services in the uk
- LARGE SURPLUS on trade and services, due to:
- shift towards tertiary sector employment, so specialise in the sector of services
- the uk therefore is more competitive in the provision of these services, and can offer better services at a lower cost.
- leads to a greater total revenue.
