econ theme 2 Flashcards
1
Q
actual economics growth
A
- measure of an increase in real GDP
2
Q
GDP
A
- total amount of g+s produced/ total amount spent/earned in a country in 1 yr
3
Q
potential economic growth
A
- measure of the increase in productive capacity of economy.
- shown by movement outwards PPF
4
Q
recession
A
-economy suffers two consecutive quarters of negative economic growth
5
Q
nominal GDP
A
- money value of all g+s produced by country in 1 year
6
Q
real GDP
A
- nominal GDP adjusted for inflation
7
Q
GDP per capita
A
- total gdp/population
-gives better indicator of living standard
8
Q
volume of output
A
- measures no. of goods produced
9
Q
value of output
A
- amount of goods x price at which they are sold
10
Q
GNI
A
- measures income received by country both domestically (GDP) and via net incomes from overseas
11
Q
PPP
A
- used to compare GDP in different countries, taking into account the cost of a ‘basket of goods’ that could be bought in each of the countries being compared
12
Q
limitations of using GDP to comapre living standards
A
-difference in pop.
-difference in rates of inflation
-type of spending by gov.
-difference in income distribution
13
Q
Easterlin paradox
A
- once incomes increase beyond a level, marginal gains in happiness falls
14
Q
inflation
A
-sustained rise in general PL
15
Q
Deflation
A
-sustained fall in general PL
16
Q
Disinflation
A
- fall in rate at which general PL is rising
17
Q
CPI
A
- measure of inflation, used for inflation targeting
- does not include housing costs
18
Q
base year
A
- used to compare price levels in different time periods
19
Q
how is CPI calculated
A
- Living /food cost survey (7000 households with self-reported diaries)
- changes in priice of the 700 most commonly used g/s
-weights assigned to each items the average household buys , the weight reflects the proportion of income spent on each item
20
Q
Limitations of CPI
A
- no housing costs (whch is significant expenditure)
- shrinkflation/ loss in quality of goods
- sampling issues
- 700 items only changed once a year, so sudden changes not documented
21
Q
CPIH
A
- includes housing costs and council tax
22
Q
Retail price index rate of inflation
A
- includes interest payments on mortgages
- but not as reliable as CPI/CPIH for international comparisons
-not really used anymore
23
Q
Demand pull inflation causes
A
-AD increases at faster rate than AS
: decrease in IR
: rise in consumer confidence
: increase in gov spending
: depreciation of exchange rate
24
Q
Cost pull inflation
A
- AS decreases
: rise in raw material prices
: fall in exchange rates
: rise in business taxes
: increase in min wage
