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Macroeconomics > economic measures definitions > Flashcards

economic measures definitions Flashcards

1
Q

economic growth

A

short run - increase in real GDP
long run - increase in productive capacity

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2
Q

real GDP

A

countrys output produced in constant prices and so adjusted for inflation

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3
Q

GDP

A

gross domestic product

value of all goods and services produced in a country in a year, can be measured by adding up all of economy’s income, expenditure and output

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4
Q

quarter

A

3 month period

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5
Q

GDP is negative

A

economy is contracting

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6
Q

two consecutive quarters of contraction =

A

economy Is in recession

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7
Q

informal economy

A

transaction not recorded
eg illegal activity - ‘cash in hand’ jobs

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8
Q

price index

A

100 x nominal GDP/real GDP

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9
Q

Nominal GDP

A

calculated first but actual figure can be distorted by inflation figures before announced adjusted by change in price levels

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10
Q

gross national income

A

total domestic and foreign output claimed by residents of a country. different to GDP, all income paid into the country

(GDP + INCOME)

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11
Q

purchasing power parity

A

exchange rate of one currency for another which compares how much a typical basket of goods in one country costs compared to another

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12
Q

Purchasing Power Parity (PPP)

A

This is an additional exchange rate adjustment that equalises the price of internationally traded goods across countries.

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13
Q

Arbitrage

A

If, at a certain exchange rate, it is cheaper to buy goods in one country than another, businesses will buy goods in the cheaper country and sell in the other for a profit.

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14
Q

National income

A

National income is used to assess changes in living standards in a country, and between countries, over time. But it is not a perfect measure.

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15
Q

disinflation

A

fall in the rate of inflation- prices are still rising but more slowly than before

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16
Q

consumer prices index

A

measure of price level used across the EU and used by the Bank of England to measure inflation against its target

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17
Q

retail prices index

A

measure of price level used in a variety of contexts, such as gov to index welfare benefits

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18
Q

RPI calculated

A

same way as CPI
+ mortgage interest repayments
+council tax

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19
Q

Demand-pull inflation

A

Demand-pull inflation is caused by increases in aggregate demand outstripping aggregate supply. The economy is close to full employment, and increases in AD lead to the general price level rising because supply cannot keep up with increased demand.

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20
Q

Exchange rate depreciation

A

– causes the price of exports to be cheaper in foreign currency terms and thus demand for exports rises.

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21
Q

menu costs

A

costs firms face of keeping prices updated in shops

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22
Q

‘hysteresis’.

A

when workers are unemployed for a time period, they become deskilled and demotivated and are less able to get new jobs - this is known as ‘hysteresis’.

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23
Q

The Claimant Count (CC)

A

The Claimant Count (CC) is defined as a person who is receiving the Job Seekers’ Allowance.

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24
Q

International Labour Organisation (ILO)

A

ILO measure defines unemployment as someone who has been actively seeking work for the past four weeks but ready and able to start in the next two weeks. This is collected in the UK by the Labour Force Survey.

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25
Q

Demand-side in the labour market refers to the demand for labour from firms.
demand side factors=

A

Demand-side factors affecting employment and unemployment include:
Health of firms, e.g. profit levels, demand for goods.
Confidence of firms.
Overall strength of economy.
Government intervention to encourage hiring.
Level of labour market regulation/costs of hiring.

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26
Q

Supply-side in the labour market refers to the supply of labour by workers.
Supply-side factors

A

Supply-side factors affecting employment and unemployment include:
Labour market flexibility, e.g. trade union strength.
Skills of workers.
Geographic mobility of workers.
Occupational mobility of workers.

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27
Q

Hysteresis

A

Hysteresis is a general term that means the history of a system affects the future of the system. In unemployment, hysteresis would mean that a history of being unemployed in the past may make a worker more likely to be unemployed in the future.

28
Q

The insider-outsider effect

A

A fall in AD reduces output and employment as some people lose their jobs.
The insiders who keep their jobs have strong bargaining power inside their firms. Their firm-specific skills and bargaining power mean that they claim wage rises, rather than hiring more ‘outsiders’

29
Q

Current account

A

Current account
The current account is comprised of:
Trade in goods and services (X-M).
Net primary income - net factor income from abroad (e.g. remittances, profits, interest on dividends).
Net secondary income - net unilateral transfers

30
Q

financial account

A

The financial account is comprised of:
Net foreign ownership of domestic assets.
Hot money flows.

31
Q

Capital account

A

The capital account is comprised of:
Sale/transfer of patents, copyrights, franchises, leases and other transferable contracts, and goodwill.
Transfers of ownership of fixed assets.

32
Q

Unilateral transfers

A

Unilateral transfers are payments by governments or individuals in which money is sent abroad without any direct good or service being received

33
Q

International trade

A

nternational trade allows current account surpluses and deficits to develop.

34
Q

A current account deficit

A

A current account deficit may show that a nation is importing lots of goods and services. However, if labour and input costs are cheaper overseas, this may reduce inflationary pressure.

35
Q

A current account surplus

A

can mean that an economy is exporting a lot of goods.

36
Q

demand-pull inflation

A

increases in price level caused by increases In aggregate demand

37
Q

cost-push inflation

A

increases in price level caused by increases in costs of production

38
Q

quantitive easing

A

growth of money supply , effect of making more money available for consumers/firms to borrow/spend/invest

increases aggregate demand and causes demand pull inflation

39
Q

inflationary noise

A

distortion of price signals caused by inflation
economic agents unsure if price rise is due to inflation or rise In product price

40
Q

unemployment

A

occurs when Individuals are without a job but actively seeking work

41
Q

unemployment rate

A

percentage of labour force who are out of work
( unemployed/labour force ) x 100

42
Q

labour force

A

those in work or actively seeking work ; also known as the active population

43
Q

economically inactive

A

people of working age who are neither employed nor unemployed

44
Q

labour force survey

A

measure of unemployment based on survey using ILO definition of unemployment

45
Q

International labour organisation

A

member organisation of the UN that collects statistics on labour market conditions and seeks to improve working conditions

46
Q

claimant count

A

measure of unemployment includes those receiving employment related benefits
known as job seekers alliance

47
Q

underemployment

A

situation- workers working less hours than they want to or are in jobs below their skill level

48
Q

Balance of payments

A

record of all financial dealings over a period of time between economic agents of one country and all other countries

49
Q

current account

A

part of balance of payments account where payments for purchase and sale of goods and services are recorded

50
Q

current account surplus

A

surplus exists when value of exports are greater than imports

51
Q

current account deficit

A

deficit exists when value of imports are greater than exports

52
Q

gov objective of balance of payments

A

promote UK exports in manafacturing and service sectors in order to balance imports and exports

53
Q

got target of balance of payments

A

to achieve situation where money entering the economy (exports) is equal to money leaving (imports)

54
Q

3 main elements of balance of payments

A

current account
capital account
financial account

55
Q

current account : trade in goods

A

AKA visibles - trade in raw materials, semi-finished goods and finished goods
UK = developed economy so has large deficit on trade in goods

56
Q

current account : trade in services

A

AKA invisibles, include insurance and banking and spending related to tourism such as hotels and restaurants
UK has a large surplus on trade in services

57
Q

current account : primary income

A

results from loan of factors of production abroad such as profits from UK companies with outlets abroad
can be ‘remittances’ swell of which the UK has a deficit

58
Q

current account : secondary income

A

payments given and received by the government from agencies such as the IMF and the World Bank

59
Q

quantitative easing

A

growth of money supply - makes money more available for consumers and firms to borrow/spend or invest-increase aggregate demand cause demand-pull inflation

60
Q

Animal spirits

A

level of confidence of business owners

61
Q

boom

A

peak of business cycle when growth is high

62
Q

budget deficit

A

gov spends more than it receives

63
Q

injection

A

spending power entering the circular flow of income

64
Q

LRAS

A

total output economy can produce when operating at full output

65
Q

marginal propensity to consume

A

proportion of increase in income spent on consumption

Macroeconomics (4 decks)

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