Economics Flashcards
What is Economic Growth?
Economic growth is the increasing capacity of an economy to satisfy the material wants and needs of its members in a given period of time. It is measured by comparing the GDP of one year to another.
What is GDP?
Gross Domestic Product is the total value of all goods and services produced within an economy in a given period of time.
What are the 3 types of GDP?
- Nominal GDP - not adjusted
- Real GDP - adjusted for price changes
- Read GDP per Capita - real GDP per head of population
What are the types of Economic Growth?
- Demand Led: increase in aggregate expenditure and any increase in C, I, G or NX
- Supply Led: increase in quality and/or quantity
What are the benefits of Economic Growth?
- increase in real income
- more economic opportunities
- better quality
- taxation to the government
What are the Costs of Economic Growth?
- does not raise living standards for all
- environmental costs
- inflationary pressure
Define Inflation and how it is calculate
The persistent and appreciable rise in the general cost prices. Measured through CPI
What are the Causes of Inflation?
- Demand Pull: too many consumers chasing too few goods, when the level of aggregate expenditure cannot be matched to the production rate.
- Cost Push: increased cost of production which is then translated into the higher consumer prices
What are the impacts of Inflation?
Income Redistribution:
Falling Real Incomes:
Negative Real Interest
Business Competitiveness
Business Uncertainty
Who gains from rising Interest?
Holders of real assets, people with significant power in the marketplace, importers
Who loses from rising interest rates?
Exporters, people on low or fixed incomes, savers
Define Unemployment
the situation whereby one who is both willing and able to work cannot find employment
What is the formula for the unemployment rate?
( Total number of unemployed / total number of people ) x 100
What is Cyclical Unemployment?
Caused by a lack of aggregate demand as the levels of spending fall, businesses cut back on production cost resulting in less demand for labour. But the opposite can occur.
What is Frictional Unemploment?
The time spent between changing jobs. It is a sign of confidence in the economy as people trust it enough to change jobs.
