Economic Indicators

Question 1

GDP

Answer 1

The market value of the final goods and services produced within the borders of a country during a particular time period.

Question 2

National Income Accounting Identity

Answer 2

Y = C + I + G + X - M

Where:
C = Consumption
I = Investment (Physical Capital)
G = Government Expenditure
X = Exports
M = Imports

Question 3

Net exports or the trade balance

Answer 3

defined as exports minus imports.

When the trade balance is positive, it is called a trade surplus.

When the trade balance is negative, it is called a trade deficit.

Question 4

Nominal GDP

Answer 4

The total value of production using current market prices to determine the value of each unit that is produced.

Question 5

Real GDP

Answer 5

The total value of production using market prices from a specific base year to determine the value of each unit that is produced.

Question 6

GDP deflator

Answer 6

The price level of the overall economy.

GDP deflator
The ratio of nominal GDP to real GDP:

= Nominal GDP/ Real GDP * 100

Question 7

Percentage Change in GDP Deflator

Answer 7

= ((GDP deflator in 2013)−(GDP deflator in 2012)) / (GDP deflator in 2012)

Question 8

Consumer Price Index (CPI)

Answer 8

The price level of a particular basket of consumer goods and services:

CPI = cost of customer basket in current year /
cost of customer basket in base year

Question 9

What’s not measured by GDP?

Answer 9

GDP does not count negative externalities such as pollution, noise, and crime.
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GDP does not record leisure.
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The Production of Certain ‘Bads’ leads to ↑GDP

Let us take the examples of crime, stress related illnesses and environmental damage:
↑ Crime  ↑ Spending on Security
↑ Stress  ↑ Spending on Healthcare
↑ Environment Damage  ↑ Spending on Environmental Cleanup
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Disparities in income distribution are not reflected
A Pareto Improvement is when a decision or activity makes everybody better off without making anyone worse off
However, if someone is making a profit and keeping it as income, it does not necessarily mean that others are getting the same amount of benefit
In some countries, some people are able to become very rich, while others get left behind  Inequality
GDP doesn’t show this up
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Question 10

GNP

Answer 10

Gross National Product (GNP) is the value of all goods and services produced by a country’s productive factors regardless of their geographical location.

If a country’s net income flows from abroad are positive, then inflows exceed outflows and GNP is greater than GDP.

If net income flows are negative GDP is greater than GNP.

Question 11

GNP formula

Answer 11

GNP = C + I + G + X –M (+ F)

F = Net Factor income form the rest of the world

F =production of domestic factors of production in foreign countries - production of foreign factors within domestic borders.

Question 12

Average GDP annual growth

Answer 12

(GDP later yr/ GDP earlier yr)^(1/no. yrs) - 1

Question 13

Pillars 1-12 categories

Answer 13

1-4 = Basic requirements (factor driven)
5-10 = Efficiency enhancers
11-12 = Innovation & sophistication factors

Question 14

What is unemployment?

Answer 14

Persons who are willing and able to work and actively seeking work but are unable to find work.

Unemployment Rate:
Number of persons unemployed as a % of the labour force

The labour force is defined as the sum of the employed and unemployed.

Question 15

Discouraged Workers

Answer 15

Discouraged workers:

• have tried to find work in the past
• are willing to take on a job
• but have given up on looking for work because they feel that nothing suitable is available.

Discouraged workers are not counted as part of the labour force.

Question 16

Underemployment:

Answer 16

People seeking full-time paid employment who work only part-time
Are employed at jobs below their capability.
Are not counted in official unemployment statistics

Question 17

Phantom Unemployed:

Answer 17

Many people report that they’re actively seeking a job when they have little interest in finding employment.
Are counted in official unemployment statistics.

Question 18

Types of unemployment

Answer 18

Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
Seasonal Unemployment

Question 19

Frictional Unemployment

Answer 19

Occurs when people leave jobs and are unemployed for a period of time while they look for a new job.

Unemployment that occurs as a result of imperfect information in the labour market.
Search process

Often takes time for workers to find jobs and in the meantime they are unemployed.

Remedies for frictional unemployment
Better job information
Reduce unemployment benefit.

Question 20

Structural Unemployment

Answer 20

Structural Unemployment refers to unemployment arising from a permanent decline in employment in industries located in a particular region or area.
mismatch between job vacancies and the skill/occupations of the unemployed.
There may be job vacancies for carpenters, but this will do little to alleviate unemployment among plumbers.
Often occurs in particular regions of a country – the collapse of the coal mining industry led to high unemployment in the Welsh valleys.

Level of structural unemployment depends on:
Degree of regional concentration of industry
Speed of change in demand and supply
The immobility of labour

Serious type of unemployment as it takes time:
for mismatches to be addressed via reskilling
for new industries to be attracted to an unemployment black spot.

Remedies for structural unemployment:
Government funded training schemes
Provide grants to attract firms into region

Question 21

Cyclical Unemployment

Answer 21

Cyclical unemployment is associated with the recessionary phase of the business cycle.

When the growth rate of economic activity slows down in a recession
fall in aggregate demand
some firms will react and make some employees redundant.

When growth rate of economic activity rises,
planned expenditures will rise
firms who wish to expand their output accordingly may hire additional workers.

Question 22

Seasonal Unemployment

Answer 22

Unemployment associated with industries or regions where demand for labour is lower at certain times of the year.
For example: tourism, agriculture.

Tourism - Particularly severe in holiday areas.
People may become temporarily unemployed over the winter months when industry slow downs.

Question 23

Measuring Unemployment in Ireland

Answer 23

1. Quarterly National Household Survey (QNHS)

2. Live Register

Question 24

Quarterly National Household Survey (QNHS

Answer 24

The Quarterly National Household Survey (QNHS) is a large-scale, nationwide survey of households in Ireland.
It is designed to produce quarterly labour force estimates that include the official measure of employment and unemployment in the state.
The survey began in September 1997 when it replaced the annual Labour Force Survey.
The purpose of the survey is the production of quarterly labour force estimates and occasional reports on special social topics.
(Central Statistics Office)

Question 25

How QNHS is Conducted

Answer 25

The sample frame of households is clustered into blocks (small areas) with each block containing 60 occupied households on the night of the 2011 Census of Population.

The sample frame is stratified using administrative county and population density

In the first stage 1,300 blocks are selected using Probability Proportional to Size (PPS) sampling and in the second stage 20 households are selected using Simple Random Sampling (SRS)”.
(Central Statistics Office 2014)

Question 26

The Live Register

Answer 26

The Live Register is compiled from returns made for each local office to the Central Statistics Office by the Department of Social Protection.

It comprises of persons under 65 years of age in the following classes:

All Claimants for Jobseeker’s Benefit (JB) excluding systematic short-time workers
Applicants for Jobseeker’s Allowance (JA) excluding smallholders/farm assists and other self-employed persons
Other registrants including applicants for credited Social Welfare contributions but excluding those directly involved in an industrial dispute.

The Live Register is not designed to measure unemployment. It includes:
part-time workers (those who work up to three days a week), seasonal and casual
workers entitled to Jobseekers Benefit or Allowance.

Question 27

Inflation

Answer 27

Inflation: An increase in the overall level of prices.

Deflation: Deflation occurs if average prices fall.

Question 28

Hyperinflation:

Answer 28

Extraordinarily high inflation. It is often defined as inflation that exceeds 50 per cent per month.

Question 29

Causes of Inflation

Answer 29

1. Demand-Pull Inflation
2. ## Cost-Push Inflation
3. Demand-Pull Inflation
   Demand-pull inflation is caused by continuing rises in aggregate demand. Demand-pull inflation is typically associated with a booming economy.
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4. Cost-Push Inflation
   Cost-push inflation is associated with continuing rises in costs and hence continuing leftward (upward) shifts in the AS curve.

Such shifts occur when costs of production rise independently of aggregate demand.

Question 30

Why Does Hyperinflation Occur?

Answer 30

The excessive growth in the supply of money.
Often in times of war
Gov cannot cut expenditure
They cannot raise enough through taxes so they face a big budget deficit.
They may decide to print money in order to reduce deficit.
Hyperinflation was seen in the United States during the War of Independence, when the government financed the war against Britain by printing money - seigniorage.

Question 31

Costs of Inflation

Answer 31

There are several costs associated with inflation. These include:
Loss of purchasing power
Shoe-leather costs
Menu costs
Effects on income distribution
Fiscal Drag
Effects on international competitiveness
Balance of payments effects
Business uncertainty and lack of stability effects

Question 32

Measuring Inflation

Answer 32

The Consumer Price Index

“The Consumer Price Index is designed to measure the change in the average level of prices (inclusive of all indirect taxes) paid for consumer goods and services by all private and institutional households in the country and by foreign tourists holidaying in Ireland” (CSO 2014).