LS2 - Economic Performance

Question 1

Economic growth

Answer 1

Rate of change of output - usually measured in GDP

Question 2

GDP

Answer 2

Gross Domestic Product - total output of an economy during a period of time
GDP per Capita - how much each person contributes to total GDP

Question 3

GNI

Answer 3

Gross National Income - measures money flowing in and out of a country through UK owned FaOPr

Question 4

Unemployment

Answer 4

High unemployment - inefficient use and underutilisation of scarce resource - indicator of poor economy
Low unemployment - efficient use of resources - indicator of good economy

Question 5

Inflation

Answer 5

Increase in average prices in an economy
High inflation - value of savings decrease, purchasing power decreases, disrupts knowledge of prices
Low inflation - good for an economy, as a small increase in prices doesn’t affect consumers too much and helps grow the economy

Question 6

Disinflation and Deflation

Answer 6

Disinflation - inflation falling from a previous period
Deflation - a decrease in average level of prices in an economy (negative inflation) - bad for economy as it is as perceived to be in terminal decline - if prices are expected to fall, people will save money to buy in the future –> low consumption

Question 7

Measuring inflation…

Answer 7

ONS Living Costs and Foods Survey - average basket of 700 goods to track prices - record prices of goods at different markets

Question 8

CPI

Answer 8

Consumer Price Index - measures overall change in consumer prices based on their basket of goods and services

Question 9

Balance of payments

Answer 9

Record of all financial dealings over a period of time between economic agents of one country and all other country

Question 10

Balance of trade

Answer 10

Balance of trade = exports - imports
Trade in goods - visibles –> exports and imports of goods
Trade in services - invisibles –> exports and imports of services

Question 11

Primary income

Answer 11

Money flowing in and out of a country resulting from employment of earlier investment - interest from foreign banks; business set up abroad bringing money back to the country

Question 12

Secondary income

Answer 12

Transfers of money between countries, that aren’t paying for goods or services - transfer of money between family members

Question 13

Current account deficit

Answer 13

Imports > exports
More money going out of country than money coming in including pri/sec income

Question 14

Current account surplus

Answer 14

Exports > imports
More money coming into country than money going out including pri/sec income