Key terms pt2 Flashcards
Productivity
An economic measure of output per unit of input. It measures efficiency and is usually measured as output per hour.
Inflation
Linked to stability, it is the general rise in average prices across an economy in a given period of time. It costs you more money to buy the same goods and the opposite is deflation.
CPI
The consumer price index is the official measure to calculate inflation in the UK. It measures the average cost of living for consumers and doesn’t include house prices
RPI
The retail price index is an older measure to calculate inflation in the UK and includes housing costs.
Balance of Payments
Records all financial transactions between the UK and the rest of the world
The current account
Measures imports and exports (goods, services and incomes moving)
Balance of trade surplus
When income from exports exceed the expenditure on imports (X>M)
Balance of trade deficit
When more is spent on imports than is made from exports (X<M)
Equilibrium or balance
When the value of imports is equal to the value of exports (X=M)
Index numbers
Statistical measures of change.
National income accounts
Measures how much output spending and income has been generated in a given period of time, shows us GDP
GNP
Gross national product is an estimate of the total value of all final products and services turned out in a given period of time by means of production owned by a country’s citizens (even if currently located out of the UK)
GNP formula
GDP + income from citizens abroad(includes interest, dividends, profits)- income earned by foreign residents
Circular flow
Shows the movement of money around the economy
Social transfers
Financial assistance in the form of benefits (welfare)
