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Economics > Chapter 6 - Measurement Of Macroeconomic Performance > Flashcards

Chapter 6 - Measurement Of Macroeconomic Performance Flashcards

1
Q

What is a policy objective?

A

A target or goal that a government wishes to achieve or ‘hit’

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2
Q

What is short run economic growth?

A

Growth of real output resulting from using idle resources (movement from a point inside the ppf to on the ppf)

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3
Q

What is long run economic growth?

A

An increase in the countries potential level of real output, and an outward shift of the economy’s production possibility frontier

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4
Q

Gross domestic product (GDP)

A

The total number of goods and services produced in an economy over a period of time

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5
Q

What is the difference between real GDP and nominal GDP?

A

Real GDP has been adjusted for price changes or inflation whereas nominal GDP is GDP measured at the current market prices, without removing the effects of inflation

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6
Q

Beveridge definition of full employment

A

3% or less of the labour force are unemployed

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7
Q

What is the free-market definition of full employment?

A

The number of workers whom employers wish to hire equals the number of workers wanting to work

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8
Q

What is better about Beveridge’s definition of full employment?

A

It accepts that withers will always be some unemployment because the economy is always changing

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9
Q

Why do free-market economists prefer their definition of full employment?

A

They think the first definition is too arbitrary and lacking any theoretical underpinning

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10
Q

Claimant count

A

The method of measuring unemployment according to those people who are claiming unemployment-related benefits

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11
Q

Labour force survey

A

A quarterly sample survey of households in the UK which seeks info about personal circumstances and their labour market status during a period of 1-4 weeks

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12
Q

What is inflation?

A

A persistent or continuing rise in the average price level

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13
Q

If the price of a particular good or service within an economy changes, is this inflation?

A

No, inflation occurs when most prices are rising by some degree across the whole economy

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14
Q

What does controlling inflation mean?

A

Achieving a low inflation rate rather than absolute price stability (a zero rate of inflation is extremely rare)

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15
Q

What is the target inflation rate in the UK?

A

2%

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16
Q

What is deflation?

A

A persistent or continuing fall in the average price level

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17
Q

Difference between deflation and disinflation?

A

Disinflation is when the rate of inflation is falling but is still positive whereas deflation involves a falling average price level

18
Q

What are the two different ways to measure inflation in the UK?

A

Consumer price index (CPI)
Retail prices index (RPI)

19
Q

What is consumer price index/how is it measured

A

It calculates the average price increase of a basket of 700 different consumer goods and services
- the official measure

20
Q

What is RPI/ when is it used?

A
  • an older measure
  • UK government use for indexation of state pensions + benefits
21
Q

What is the current account of the balance of payments?

A

It measures all of the currency flows into and out of a country in a particular time period in pay,ent for exports and imports

22
Q

What are exports?

A

Goods and services produced domestically (inside a particular country) and sold to residents of other countries

23
Q

What are imports?

A

Goods or services produced in other countries and sold to residents of this country

24
Q

What is a balance of trade deficit?

A

It occurs when the money value of a country’s imports exceeds the money value of it’s exports

25
Q

What is a balance of trade surplus?

A

It occurs when the money value of a country’s exports exceeds the money value of it’s imports

26
Q

What does it mean by the objective of ‘balancing the budget’?

A

When the government spending equals government revenue (mainly from tax)

27
Q

What is a budget deficit?

A

When the government spending is greater than government revenue

28
Q

What is a policy conflict?

A

It occurs when two objectives cannot be achieved simultaneously; the better the achieving one objective, the worse the performance in achieving the other

29
Q

What is the trade off between economic growth and environmental protection?

A

Increased production of goods and services = higher CO2 emissions, loss of biodiversity and greater output of non-biodegradable waste
- global warming damages living standards of current + future generations (more extreme weather conditions)
- loss of biodiversity and finite resources could compromise the living standards of future generations

30
Q

What is the trade off between Balance of payments equilibrium on the current account and economic growth

A

As GDP rises and real incomes increase, citizens consume more foreign goods and services e.g. foreign built cars and holidays

31
Q

What is the trade off between falling unemployment and low inflation rates?

A

As unemployment falls, real income increases meaning demand for goods and services increase. This causes demand-pull inflation. PHILLIPS CURVE

32
Q

What do Keynesian economists believe?

A

That the government should manage the economy

33
Q

What do free-market economists believe?

A

They dislike government intervention

34
Q

What is the monetary policy?

A

The use by the government and the Bank of England of interest rates and other instruments to try to achieve the governments policy objectives

35
Q

What is the fiscal policy?

A

The use by the government of government spending and taxation to try achieve the government’s policy objectives

36
Q

What are lead indicators?

A

Provide info about the future state of the economy
- from surveys of consumer and business confidence and investment intentions to provide info about aggregate demand in the future

37
Q

What are lag indicators?

A

Provide info about past and possibly current economic performance and to what extent policy objectives have been achieved.

38
Q

what is GNP a measurement of?

A

the total value of all finished goods and services produced by a country’s citizens in a given financial year, irrespective of their location
e.g.f a German-owned company has a factory in the United States, the output of this factory would be included in U.S. GDP, but in German GNP.

39
Q

what is national income?

A

GNP - depreciation ( the cost of replacing capital due to wear and tear)

40
Q
A

Economics (9 decks)

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