lesson 1 Flashcards
what is macro economics?
economics that focuses on the economy as a whole and its performance and behaviour (rather than individuals, markets or businesses)
how do we measure economic performance? (the four factors)
looking at our:
- output
- unemployment levels
- inflation
- balance of payments
what is balance of payments?
the imports and exports coming in and out the country
what does output tell us?
- the value of everything produced
- whether the country can deliver more goods and services to citizens over time
what is output often referred to as?
economic growth
how do we measure growth (value of everything produced)?
GDP (measures output)
for output over time what does actual growth tell us?
what is happening right now
for output over time what does trend growth tell us?
the average over time
for output over time what does being below the trend show?
unemployment
for output over time what does being above the trend show?
inflation
when REAL is placed before GDP what does it mean?
its adjusted for inflation
what does the level of unemployment tell us about the economy?
if the economy is able to provide jobs for the labour force
when will unemployment tend to rise?
actual growth is below trend growth
why does unemployment have a huge opportunity cost?
- waste of scarce resources as lost out put cannot be recovered
if we produce more (increase output) what happens?
living standards go up
what does it mean if economic growth is positive?
- more goods being produced
- jobs produced
- consumers buy more so they have more options and raise living standards
what does it mean if economic growth is negative?
- the economy is shrinking
- unemployment
- less goods being made
- less tax receipts
- falling living standards
what does it mean for the government if there is less tax receipts?
the government has less money to spend which means a decrease in the public goods being provided and their quality
why does growth vary so much?
- confidence varies as the economy is a reflection of the people consuming the products
- economic growth
- external factors
why does consumer confidence varying effect the economy?
the economy is a reflection of the people consuming the products
consequences of strong growth?
- higher living standards
- inflation
consequences of negative growth?
- lower living standards
- inflation pressure eases
- economy shrinks
- unemployment
what is inflation?
increase in the price levels over time. inflation reduces the value of the currency over time.
when inflation causes prices to rise quickly, how do consumer, firms and workers react which can cause prices to be driven up further?
- the wage/price spiral
- workers may push for higher wages, increasing business costs which can cause higher prices
what is a BOP deficit?
- import more than we export
- leakages
what does the government want?
- high output
- low unemployment
- low inflation
- a reasonable balance of payments
ways to measure the living standards of a population?
- employment/unemployment
- GDP
- doctors per person
- housing
poverty rates - infant mortality
- incomes
- educational attainment
what can the UK do to be more internationally competitive?
- raise the quality of goods
- increasing productivity
- lower costs by increasing productivity
