CH22 Measures of economic performance Flashcards
What is microeconomics?
it is the study of individual markets within an economy. For instance, it is concerned with individual markets for goods or the market for labour
What is macroeconomics?
it is the study of the economy as a whole. It considers the total value produced of goods and services in an economy
What is one reason why macroeconomics is useful?
because it tells us something about the performance of an economy. In particular, it allows economists to compare the economy today with the past and to also compare different economies
What are the criteria’s to consider when judging the performance of an economy?
-how much is being produced. The more that is produced, the better is usually considered the economic performance (economic growth)
-whether resources are being fully utilised (unemployment)
-the rate at which prices are rising (inflation)
-the balance of payments
What is economic growth?
The rate of change of output
What is used by countries around the world to calculate their output?
a standard definition of output based on a United Nation measure
What is the benefit of using a standard definition?
it allows output to be compared between countries and over time
What is this measure of output called?
Gross Domestic Product or GDP
Why is economic growth generally considered to be desirable?
because individuals prefer to consumer more rather than fewer goods and services. This is based on the assumption that wants are infinite
Why is unemployment a major problem in society?
- it represents a waste of scarce resources. Output could be higher if the unemployed were in work
- it leads to poverty for those who are out of work.
–so high unemployment is an indicator of poor national economic performance
What is inflation?
it is the increase in average prices in an economy
What is generally considered to be better, low or high inflation?
low inflation. This is because inflation has a number of adverse affects. For instance, rising prices mean that the value of what savings can buy falls.
What does deflation make harder for a country?
it makes it harder for a country to grow its GDP
