eg Flashcards
what is eg
- ↑ in amount of g+s (GDP) the whole economy can produce over and above what it produced last year.
measuring eg
gdp in diff time periods
rate growth = % chnage in gdp per year/quarter
nominal gdp
change in $ value of output overtime
real gdp
change in $ value of output overtime (adjusted to inf)
gdp per capita
real $ value in output / pop
real gdp per capita
most meaningful
real ability to satisfy cit. needs and wants
real gdp per capita if gdp increase due to pop
if total gdp ↑ but pop ↑ at higher rate, then ↑ gdp is due to more people
sustainable economic growth
future LS and opps are not compromised by current growth in period
inc eg (sustainable)
environmental psu (pollution) & cell depletion
achieving eg
2QCELL
technical efficiency (achieving eg)
inc output with same / smaller inputs
allocative efficiency
better allocation to reduce opp cost
dynamic efficiency
ability to adapt quickly and move resources to productive sectors
tech progress
changes in tech/scientific knowledge applied to production progess
embodied
change in development of c goods
disembodied
change in processes & techniques
research & development (tech progress)
innovation - competitive advantage to rivals
lower costs / inc efficiency
measuring tech progress
productivity - measures output from given amount of input
labour productivity - per unit output per unit labour
multifactor productivity - indicator of productivity
inflation
rise in general level of g+s over time
measuring inflation - CPI
determines price changes produced by abs
- compare current prices with past prices
CPI calc (previous q)
100000 g+s (basket)
CPI - weighting
more important items (fuel) have higher weighting compared to less important items (hire cars)
- renewed every 5 years (items change)
measuring inflation using CPI
measured price movements not price
- impacts pp, pp indicator includes tax&int.
CPI = headline inflation rate
measures changes in cost of purchases made by wage and salary hh
some rise some fall
headline items include..
items that are volatile or caused by short term factors
cpi is longterm>shorterm
limitations of headline inflation
- only measures capital cities
- does not reflect substitutions in response to price change
- no account for change in price overtime
underlying inflation
measures inflationary psu in econ due to market forces (supply and demand)
rbausing cpi
trimmed mean
all price movements from big to small then removing 15% each side
weighted average
weighted median selects middle price movement
demand pull
- shortage in supply
- demand is higher = higher price
- low unemployment rates
cause of demand pull
- growing econ
- increasing x demand
- expansion of income
demand pull vs cost push
cost-push inflation is driven by supply costs while demand-pull inflation is driven by consumer demand
cost push
Cost-push inflation occurs when overall prices increase due to increases in the cost of wages and raw materials.
causes of cost push
higher costs of production decrease the aggregate supply in the economy.
benefits of inflation
shows growing econ
For example, borrowers at fixed interest rates tend to benefit from inflation while lenders and savers are hurt by it.
demand pull example
AUS - boom
- unemployment rates fall
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