intro to macroeconomics Flashcards
components of macroeconomics
economic growth, inflation and unemployment
definition of economic growth
the increase in the level of real output (aka Gross Domestic Product) over a period of time
formula of economic growth
(real GDP1 - real GDP2) / real GDP2 x 100%
% changes
positive % change = real GDP has risen
negative % change = real GDP has fallen
GDP values
higher value = more rapid change
lower value = slower change
implications of high economic growth
indicates the economy is growing -> more G&S produced and FOP being employed -> purchasing power increases -> increase in mSOL (govt can also collect more taxes -> increase nmSOL)
definition of inflation
the sustained increase in General Price Level (GPL)
formula of inflation
(new CPI - old CPI) / old CPI x 100%
sign of inflation
positive sign = inflation
negative sign = deflation
inflation values
high value = rapid change
low value = slow change
implications of inflation
govt wants to keep a low + steady inflation rate (1-3%) -> indicates the country is expanding at a sustainable rate
if inflation is too high -> lesser purchasing power -> enjoy lesser G&S -> decrease mSOL
definition of unemployment
the amount of productive resources in a country that is not being utilized to produce output
formula of unemployment
total number of unemployed workers / total size of the labour force x 100%
low unemployment rate
good, desirable -> signifies that country’s resources are fully utilized to produce G&S
high unemployment rate
undesirable -> signifies that a large proportion of the resources are left idle -> mSOL could be higher
