Interim Flashcards
Gross Domestic Product (GDP)
Measures the quantity of goods and services produced in an economy
Real {statistic}
The statistic is adjusted for inflation
Inflation
the rate of change of average prices in an economy - measured by the Consumer Price Index (CPI)
Unemployment Rate
is the percentage of people in the labour force without a job but registered as being willing and available for work
Economic Growth
An increase in the production of economic goods and services in one period of time
4 main macroeconomic objectives
- Economic Growth
- Minimising Unemployment
- Price Stability
- Stable Balance Of Payments On The Current Account
Deficit (BOP)
Value of imports > value of exports
Surplus (BOP)
Value of exports > value of imports
Distribution of Income
Equitable Distribution of Income
Income and wealth should be distributed equitably, so the gap between the rich and the poor isn’t extreme
CPI
The Consumer Price Index measures the household purchasing power with a (Family Expenditure) survey to find out what households spend their income on. From this a basket of goods is created and weighed according to the amount spent on each product
RPI
Retail Price Index is the same as CPI but it involves housing costs such payments on mortgage interest, tax etc. Due to this, RPI has more value than CPI
Productivity
defined as the output per worker per period of time
Weighted index number (use and formula)
Use: We use weightings to show the relative importance of individual data in our findings
Formula: Sum of Weightings x Index numbers / Sum of Weightings
Index number (use and formula)
Index numbers are used to make comparisons over time.
Raw number / Base year raw number x 100
Economic Welfare
Theoretically, everyone wants to maximise their economic welfare
Economic Welfare: The economic satisfication of households/firms
Exchange Rate
Strong Pound Imports Cheap Exports Dear (SPICED) and vice versa. This is because GBP is strong therefore has great spending power however less exports as expensive to others.
GNI
Gross national income measures the total income earned by a country’s residents/businesses regardless of where it was earned
GNP
Gross national product measures the total value of the goods and services produced by a country’s residents regardless where it was earned.
PPP
PPP - Purchasing Power Parity
This is a theory that estimated how much the exchange rate needs adjusting so that an exchange is equivalent according to each currency’s purchasing power.
This helps minimise misleading comparisons between countries
National Income
the total value of goods and services a country produces (usually the output in one year).
It can be measured in GDP, GNI or GNP
Injections
This is where money enters the economy
1. Investment - spending on capital goods therefore more output
2. Exports - an injection of money from selling it
3. Government spending - welfare, increase demand
Withdrawals
This is where money leaves the economy
1. Savings - people spending less so less demand
2. Imports - a withdrawal of money to other countries for the good
3. Taxes - less disposable income
Net injections
If there are net injections in an economy, there will be an expansion of national output
Net withdrawals
If there are net withdrawals from an economy, there will be a contraction of national output
Aggregate Demand
Aggregate demand is the total demand for all goods and services in an economy at any given price level over a period of time.
AD Formula
C + I + G + (X-M)
C - Consumption
I - Investment
G - Government Spending
X - Exports
M - Imports
AD Curve
Price Level on Y-axis
Real National Output on X-axis
Aggregate Demand is the gradient
Accelerator effect
It states that a rise in GDP will lead to a proportionately larger increase in investment (as they want to meet future anticipated demand)
The multiplier effect
The multiplier effect occurs when an intial injection into the economy (circular flow of income) causes a proportionally larger final increase in the level of real national output
IOE
Input = Output = Expenditure
Macroeconomic equilibrium
the demand-side of the economy and supply-side of the economy equal each other.
