6 the measurement of macro economic performance Flashcards
what are the 4 main macroeconomic objectives
- economic growth
- low unemployment
- price stability (1-3)
- satisfactory balance of payments
short-run economic growth definition
growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy
slack economic definition
unemployed resources
long-run economic growth definition
an increase in the economy’s potential level of real output, and an outward shift of the economy’s ppf
gross domestic product (GDP) definition
the sum of all goods and services, or level of output, produced in the economy over a period of time, usually 1 year
Real GDP definition
a measure of all the goods and services produced in an economy, adjusted for price changes or inflation
-changes nominal GDP to a measure tat reflects changes in the total output of the economy
nominal GDP definition
GDP measured at the current market price, without removing the effects of inflation
recession definition
a fall in real GDP for 2 or more consecutive quarters
full employment definition
2 definitions
- Beveridge 3% or less of the labour force unemployed
- free market, number of workers whom employers wish to hire equals number of workers wanting to work (equilibrium)
claimant count definition
the method of measuring unemployment according to those people who are claiming unemployment-related benefits (job seeker allowance)
labour force survey definition
a quartely summary of households in the UK, measures their circumstances and their labour market status
what are the 2 ways to measure unemployment
-claimant count
- labour force survey (more accurate)
inflation definition
a sustained rise in the average price level over a period of time
deflation defintion
a sustained fall in the average price level over a period of time
disinflation defintion
when the rate of inflation is falling, but still positive
consumer price index (CPI) definition
the official measure used to calculate the rate of consumer price inflation in the UK
- calculates the average price increase if a basket of 700 different consumer goods and services
Retail prices index (RPI) definition
older measurement to calculate consumer price inflation
- less accurate
- takes house prices to account
balance of payments definition
a record of all the currency flows into and out of a country in a particular time period
current account of the balance of payments definition
measures all the currency flows into and out of a country in a particular time period in payment for exports and imports, together with income and transfer flows
exports definition
domestically produced goods or services sold to residents of other countries
imports definition
goods or services produced in other countries sold to residents of this country
balance of trade definition
the difference between the money value of a country’s imports and their exports
- largest component of a country’s balance of payments on current account
balance of trade deficit definition
the money value of a country’s imports exceeds the value of their exports
balance of trade surplus definition
the money value of a country’s exports exceeds the money value of its imports
balanced budget definition
when government spending equals government revenue, (mostly tax revenue)
budget deficit definition
when government spending is greater than government revenue
budget surplus definition
when government revenue is greater than government spending
policy conflict definition
occurs when 2 policy objectives cannot both be achieved at the same time
- the better the performance in one the worse in the other
- full employment and low inflation
trade-off between policy objectives definition
an acceptable combinations between 2 extremes
- 2% inflation and 4% unemployment
keynesian economists definition
folowers of the economist john maynard keynes, believes that government should manage the economy particularly through fiscal policy
pro-free market economists definition
opponents of Keynesian economists, dislike government intervention within an economy and prefer free markets
(Margarette thatcher)
monetary policy definition
Policies that manipulate the money supply and interest rates and regulate the activities of banks to achieve monetary objectives such as an inflation rate target and availability of liquidity
fiscal policy definition
the use by the government of government spending and taxation to try to achieve the governments policy objective
what is gdp per capita
total gdp/population
define economically inactive
those who are neither employed or unemployed- not actively searching for employment
4 criteria for a person to be named unemployed
- willing to work
- over 16
- under 65
- able to work in the next two weeks
- not already employed (education)
