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A Level Economics (MACRO) > Economic Policy Objectives > Flashcards

Economic Policy Objectives Flashcards

1
Q

What is short-run economic growth?

A

An increase in the total value/output of all goods and services produced in an economy in a given period of time.

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2
Q

What is long-run economic growth?

A

An increase in the productive potential of an economy

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3
Q

4 ways to show short-run economic growth on a diagram

A
  • change in costs
  • an increase in AD
  • an increase in AD Keynesian (from curve to vertical area)
  • using a PPC (outwards to inwards)
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4
Q

What is the policy objective of economic growth?

A

Increase standard of living for the population

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5
Q

What is meant by nominal value?

A

the value of an economic variable based on current prices, taking no account of changing prices through time

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6
Q

What is meant by Real Value?

A

the value of an economic variable based on current prices, taking account of changing prices through time

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7
Q

How do you calculate a price index?

A

nominal value/real value x 100

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8
Q

How do you calculate real value?

A

normal value/price index x 100

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9
Q

What is nominal GDP?

A

National output measured in terms of prices in the year in question

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10
Q

What is real GDP?

A

Nominal GDP with the effects of inflation removed

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11
Q

How to calculate real to nominal GDP

A

nominal gdp/price index x 100

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12
Q

What is GNI

A

Gross National Income is GDP plus net income from abroad

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13
Q

What is GDP per capita?

A

The average level of GDP per head of the population

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14
Q

go back to issues with gdp

A
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15
Q

What is meant by a recession

A

It occurs when actual growth falls for 2 or more consecutive quarters

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16
Q

Four reasons why GDP and Economic Growth are measured

A
  • indicator of performance to governments
  • can be used to assess the population’s standard of living
  • can inform government decision - making
  • can be compared with other economies
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17
Q

What is economic growth

A

Economic growth is an increase in real GDP in an economy in a year caused by an increase in AD or an increase in LRAS

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18
Q

What are the five macroeconomic objectives

A

Sustainable economic growth
Low unemployment
Low/ stable inflation
Fair distribution of income
Competitive international trade

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19
Q

What are the five macroeconomic objectives

A

Sustainable economic growth
Low unemployment
Low/ stable inflation
Fair distribution of income
Competitive international trade

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20
Q

How to calculate real GDP GO BK

A

1) Calculate nominal GDP
2) Base year price index and current year price index
3) multiply nominal GDP by base year index divided by the current year price index

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21
Q

What is meant by a recession

A

Occurs when actual growth falls for 2 or more consecutive quarters

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22
Q

Why are GDP and economic growth measured

A
  • can be used to assess quality of life for citizens
  • inform gov decision making
  • can be compared with other economies
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23
Q

What are the main difficulties of measuring economic growth and GDP

A

Doesn’t take into account:
Income inequality
Unofficial work
Exchange rate problems -
Quality of goods and services

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24
Q

What is the economic cycle

A

A phenomenon whereby GDP fluctuates around its underlying trend, following a regular pattern

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25
Q

What is GDP per capita

A

The average level of GDP per head of the population

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26
Q

Describe divergence from the trend of the economic cycle

A

Sustained economic growth above the trend rate is likely to cause inflation and be unsustainable

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27
Q

Factors affecting the trend rate of economic growth

A

Investment in capital
Technological development
Labour productivity
Flexibility
Public sector investment

28
Q

What is an output gap

A

The difference between the actual and potential GDP growth

29
Q

What is a negative output gap

A

When the level of actual GDP is less than potential GDP

30
Q

What is a positive output gap

A

When the actual GDP is greater than the estimated potential

31
Q

Main problem with the output gap

A
  • difficult to measure the potential output of a country
32
Q

What is sustainable economic growth

A

A rate of growth which can be maintained without creating other significant economic problems especially for future generations

33
Q

What is poverty

A

Income is below the level that would allow someone to enjoy some agreed minimum standard of living

34
Q

What is economic development

A

The process of improving people’s economic well-being and quality of life

35
Q

What is the primary sector

A

The sector in which production uses natural resources, including the extraction of raw materials and the growing of crops

36
Q

What is the secondary sector?

A

The sector involving the production of manufactured goods

37
Q

What is the impact of the importance/reliance on the agricultural sector but lower development countries?

A
  • agriculture tends to display lower productivity than other sectors
  • Tends to be correlated with low income per head
38
Q

Explain the policy of sustainable development

A

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs

39
Q

What are the two ways to measure economic development?

A

GNI and HDI

40
Q

What are the advantages of GNI as a measure of development?

A
  • straightforward/wildly understood
  • Figures available for most countries in the world
41
Q

What are the problems of GNI as a measure of development?

A
  • doesn’t address extent of income distribution
  • doesn’t address the informal sector
  • doesn’t address pace and scale of pollution
  • failure to include quality of life measures
42
Q

What are the three aspects of human development

A
  • resources
  • knowledge of how to make good use of those resources
  • a reasonable life span in which to make use of those resources
43
Q

3 pros of the HDI

A
  • determine areas that need urgent attention
  • accuracy: text measurement in three areas, health education and income level
  • allocation of funds : highlights areas that need development
44
Q

What are three cons of the HDI?

A
45
Q

What is the definition of employment?

A

People who are either working for firms or other organisations or self-employed

46
Q

What is the definition for economically inactive?

A

Those people of working age are not looking for work for a variety of reasons

47
Q

What are discouraged workers

A

Discourage work as people who have been unable to find employment and who are no longer looking for work

48
Q

What is the workforce?

A

The workforce is made up of people who were economically active either in employment or unemployed

49
Q

What is meant by unemployment?

A

Those who are jobless available to work and are actively seeking employment

50
Q

What is the calculation for the unemployment rate?

A

Unemployed / labour force x 100

51
Q

What is meant by the policy objective of full employment?

A

Situation where people who are economically active in the workforce and are willing to work at going wage rate are able to find employment

52
Q

What are the two ways in which unemployment is measured?

A

1) Claimant Counts
2) Labour Force Survey

53
Q

What is the definition of unemployment based on the ILO?

A

People who are out of work want a job have actively sort work in the last four weeks and are available to start in the next two weeks or waiting to start in the next two weeks

54
Q

What are the problems with the claimant count?

A
  • not everyone will claim benefits who cannot find a job
  • some people clean the benefit but I’m not prepared to work
  • Some people are not eligible for any benefits
55
Q

What are the problems with ILO unemployment data?

A

Based on sample evidence
some people may be unemployed because they can’t find work at their desired wage
Some people may be unemployed because they can’t find work as many hours as they would like

56
Q

What is the natural rate of unemployment?

A

The level of unemployment at which inflation is at a stable level, but there was no downward pressure on the price level

57
Q

What is voluntary unemployment?

A

Refers to a situation where an individual is not working, but is able and willing to work and is actively seeking employment

58
Q

What is meant by inflation

A

A sustained increase in the general price level

59
Q

What is meant by disinflation

A
  • a fall in the inflation rate
  • it means that the general price level is increasing at a slower rate
60
Q

What is meant by deflation

A

A situation where there is a fall in the average price level
- negative inflation

61
Q

What are nominal values

A

The unadjusted rate or current price, without taking inflation into account

62
Q

What are real values

A

Adjust,meta are made for general price level changes over time

63
Q

What are the two measures of inflation

A

CPI and RPI

64
Q

What is the balance of payments ?

A

The BOP is a set of accounts recording all financial transactions made between consumers, businesses and the government in one county with others

65
Q

What is income?

A

The flow of wages/salaries and other income in a period

66
Q

What is wealth

A

And accumulated stock of assess, which can generate income

67
Q

What is the marginal productivity theory?

A

It’s suggested an individuals pay is determined by the individual workers marginal revenue

A Level Economics (MACRO) (5 decks)

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