Basic Economic concepts

Question 1

What is productivity?

Answer 1

Productivity is the output per worker or effective worker

Question 2

What is inflation

Answer 2

Inflation is the % increase in price of a representative basket of goods. It can be measured by CPI, RPI, core inflation (minus food and commodity prices)

Question 3

What is the Balance of Payments

Answer 3

Balance of Payments = Current Account + Capital Account

Question 4

What is the Current Account?

Answer 4

The current account is the sum of:

• Balance of trade in goods (visibles)
• Balance of trade in services (invisibles) e.g. tourism, insurance.
• Net income flows. Primary income flows (wages and investment income)
• Net current transfers. Secondary income flows (e.g. government transfers to UN, EU)