Chapter 9 : The measure of macroeconomic performance Flashcards
What is a policy objective?
A policy objective is a target or goal the government wishes to achieve.
What are the UK’s policy objectives?
- achieve economic growth, improve living standards and levels of economic welfare
- create and maintain full employment or low employment
- limit or control inflation or achieve price stability
- attain a satisfactory balance of payments
What is short-run economic growth?
The growth of real output resulting from the use of idle resources.
What is long-run economic growth?
The increase in the economy’s potential level of output.
What is GDP?
GDP is the sum of all goods and services and the level of output produced in the economy over a period of time.
What is Nominal GDP?
The GDP measured at the current market prices.
What is Real GDP?
GDP adjusted for price changes or inflation.
What is a recession?
A recession is 6 months or more of negative economic growth or a declining real national output.
What are the two definitions of full employment?
- According to Beveridge it is when 3% or less of the labour force is unemployed
- According to the free market it is when the number of workers a firm wishes to hire = the number of workers wanting to work
What are the two ways to measure unemployment ? Explain them.
The claimant count and the Labour Force Survey.
What is the difference between inflation, deflation and disinflation?
Inflation is a continuing rise in the average price level. Whereas deflation is the continuing tendency for a fall in the average price level. Disinflation is when he rate of inflation is falling but still positive.
What is the price index?
An index number showing the extent to which prices or a basket of prices and changed in a period of time based off the prices in a base year.
What is the consumer price index?
The official measure to calculate the relate of consumer price inflation in the UK.
What is the retail price index?
The measure formerly used to calculate consumer price inflation.
What is indexation?
The automatic adjustment of items such as pensions and welfare benefits to changes in the price level through the use of a price index.
What is a balance of payments?
The measure of the currency flowing into and out of a country in a particular period of time.
What is a current account?
A measure of all the currency flowing in and out of a country in a particular period of time in payment for exports and imports of goods and services.
What is the difference between exports and imports?
An export is a domestically produced good sold to residents in another country. Whereas an import is a good or service produced in other countries and sold to the residents of this country.
What is balance of trade?
The difference between the money value of a country’s exports and imports.
What is a balance trade deficit?
This is if the money value of imports exceeds the money value of exports.
What is a balance of trade surplus?
This is if the money value of exports exceeds the money value of imports.
What is a satisfactory balance of payments?
When the current account is in equilibrium or when there is a small surplus or a small but sustainable deficit.
What are some other macroeconomic objectives?
- Balancing the budget
- Equitable and fairer distribution of income
- Reducing or balancing governments budget deficit
What is a policy conflict?
When two policy objectives cannot be achieved at the same time.
