Chapter 6 - The measurement of macroeconomic performance Flashcards
What is MACROECONOMICS
The study of the whole economy at the aggregate level
What is a POLICY OBJECTIVE
A target or goal that policy-makers aim to ‘hit’
What is SHORT-RUN ECONOMIC GROWTH
Growth of real output resulting from using idle resources
What is LONG-RUN ECONOMIC GROWTH
Increase in the economy’s potential level of output, outward shift in PPF
What is GROSS DOMESTIC PRODUCT (GDP)
Sum of all goods and services produced in a period of time
What is REAL GDP
Measure of goods and services produced in an economy adjusted for inflation
What is NOMINAL GDP
GDP measured at current market prices
What is a RECESSION
A fall in real GDP for 6 months or more
What is FULL EMPLOYMENT
Beveridge definition- 3% of the labour force unemployed
Free market definition - where the number of workers who are wanted to employ equals the number wanting to work
What is the CLAIMANT COUNT
Method of measuring unemployment based on how many people are claiming unemployment benefits
What is the LABOUR FORCE SURVEY
Quarterly sample survey measuring labour status during a period of 1-4 weeks
What is INFLATION
Continuing rise in the average price level
What is DEFLATION
Continuing fall in the average price level
What is DISINFLATION
When the rate of inflation is falling but still positive
What is the PRICE INDEX
index number showing how price has changed in relation to the base year
What is the CONSUMER PRICES INDEX (CPI)
official measure of inflation in the uk from a basket of 700 consumer goods and services
What is the RETAIL PRICES INDEX (RPI)
older measure of inflation
What is INDEXATION
automatic adjustment of items to changes in the price level using a price index
What is the BALANCE OF PAYMENTS
record of all currency that flows in and out of a country in a particular time period
What is the CURRENT ACCOUNT OF THE BALANCE OF PAYMENTS
currency flows in and out of a country in a time period in payment for imports and exports, together with income and transfer flows
What are EXPORTS
goods and services sold to other countries
What are IMPORTS
goods or services purchased from other countries
What is the BALANCE OF TRADE
difference between imports and exports
BALANCE OF TRADE DEFICIT
imports exceed exports
BALANCE OF TRADE SURPLUS
exports exceed imports
BALANCED BUDGET
government spending equals government revenue (mostly tax revenue)
BUDGET DEFICIT
government spending is greater than government revenue
POLICY CONFLICT
when two policy objectives cannot be achieved at the same time; the better one does, the worse the other does
TRADE OFF BETWEEN POLICY OBJECTIVES
making the best out of the two extremes of policy conflict
KEYNSIAN ECONOMISTS
followers of keynes, who believe that governments should control the economy through fiscal policy
PRO-FREE MARKET ECONOMISTS
dislike government intervention and promote free markets
MONETARY POLICY
the use of interest rates and other monetary instruments to achieve policy objectives
FISCAL POLICY
the use of government spending and taxation to achieve government objectives
PERFORMANCE INDICATOR
provides information for judging the success or failure of a particular type of government policy
INDEX NUMBER
a number used to accurately compare two values. the base years value is set to 100 and the percentage increases are then added to that value
