Chapter 9 - Measurement of macroeconomic performance Flashcards
What are the four sectors (economic agents) the economy is made up of
Households
Firms
Government (the public or state sector)
International (e.g consumers buying overseas products (M) and Foreigners buying UK products (X) )
What do households do for the economy
They receive payments (income) for their services (eg labour and land) and use this money to buy the output of firms (i.e consumption or household spending).
What do firms do for the economy
They use land labour and capital to produce goods and services for which they pay wages rent etc (income) and receive payment (expenditure)
What is macroeconomics
the performance of the economy as a whole
What is GDP (Gross domestic product)
The monetary value of all goods and services produced within the UK in a given time period
What is real GDP
The volume of goods and services produced within the UK (i.e. GDP adjusted for changes in the price level)
What is economic growth
The percentage rate of increase of real GDP
What is inflation
a general rise in the average price level.
Examples of microeconomics
- Recession in the tourist industry due to the global downturn
- A government subsidy to steel producers
- A recession in the textiles industry
- Increased spending on the National Health Service
Examples of macroeconomics
- Strong economic growth arising from high levels of consumer spending
- A fall in exports because of a recession in leading European markets
- Higher interest rates to curb inflationary pressure
What are the main objectives of a government
TIGERS (Trade, Inflation, Growth, Employment, Redistribution, Sustainability)
The 4 main objectives of government policies
- Economic Growth
- Maintain Full Employment / Low Unemployment
- Limit or control inflation
- Achieve a satisfactory balance of payments
What is an objective
A target or goal that policy makers aim to hit.
What is an instrument
A tool or set of tools used to try to achieve a policy objective.
What is short-run economic growth
Growth of Real output resulting from using idle resources
What is long-run economic growth
An increase in the economy’s potential level of real output
What is full employment
Beveridge Definition: 3% or less of the labour force unemployed.
Free-market definition: The level of employment occurring at the market-clearing real-wage rate.
What is the claimant count
people who are claiming unemployment related benefits
What is the labour force survey
A quarterly sample survey of households in the UK. Its purpose is to provide information on the UK labour market.
What is deflation
a persistent or continuing fall in the average price level.
What is disinflation
when the rate of inflation is falling, but still positive. E.g. prices were rising by 5% but although still rising they are only now rising by 2%.
How do you measure inflation
CPI (Consumer price index) - the official measure
RPI (Retail price index) - The older UK measure
What is the balance of payments
a record of all the currency flows into and out of a country in a particular time period.
What are the 2 main sections of the Current Account of the Balance of Payments
The money value of Exports and the money value of Imports. (also known as The balance of trade)
What is trade surplus
exports are greater than imports
What is budget deficit
imports are greater than exports
What is a trade-off
involves sacrificing some of X to get more of Y
What is the main aim of a government policy
increase the economic welfare of the whole country.
What are some conflicts of Full employment and economic growth
Inflation and a Satisfactory Balance of Payments
What is a conflict of economic growth
Greater income equality
What is a conflict of current living standards
Future living standards
What are lag indicators
Shows the recent performance of the economy. E.g. GDP Data, Unemployment Data, Current Account Data.
What are lead indicators
Give an indication of where the economy is heading. E.g. Survey of consumer & business confidence, Holidays pre-booked.
What is an index number
a figure reflecting price or quantity compared with a standard or base value. (The base value has an index number of 100 always)
