Macro 1 and 2 Flashcards
What is inflation
The rate of the increase of prices over time which means over time peoples money becomes less valuable as they can buy less.
How is inflation measured
By comparing the costs of good today to the costs of goods a year ago
What is CPI inflation
Consumer price index measures a representative basket of goods and services purchased by households e.g. rent, food, clothing
What is RPI inflation
Retails price index includes a broader set of expenses including housing costs, mortgage payments, council tax which CPI does not consider.
What is the target inflation rate in the UK
2%
What is the current UK inflation rate
6.3% for August 2023
What is the effect of high inflation rate on incomes
High inflation can lead to the erosion of real wages as the cost of living increases meaning people have to spend more just to survive so they will have less/no disposable income
What is macroeconomics
Macroeconomics is interested in many industries operating in or between national economies
What are the three economic agents
Households, firms, governments
What is an economic indicator
A statistic about economic activity
What is economic growth
The expansion of the productive potential of the economy
How is economic growth measured
By the GDP - The total production of goods and services in the economy
What does GDP measure
The monetary value of goods and services produced in the economy over a period of time.
What is the difference between norminal GDP and real GDP
Norminal GDP reflects the raw number in current British pound unadjusted for inflation. However, real GDP adjusts the value for inflation and deflation
What is GDP per capita
Per Capita GDP represents the average GDP per person and is calculated by dividing the total by the population.
What is the goverment aim for economic growth in 2022
2.5%
What is unemployment
The state in which an individual actively seeks employment but is unsuccessful
What is the difference between unemployment level and unemployment rate
Unemployment level is the number of people unemployed, however Unemployment rate is the percentage of people unemployed to the number of people employed
How is unemployment level measured
Labour force survey
How is unemployment rate measured
Number of people unemployed divided by the economically active population (number employed + number unemployed)
What is the difference between claimant count and Labour force survey as measures of unemployment
Claimant count is a count of the number of people who claim unemployment related benefits. Whereas, labour force survey is the self-classification of being ‘out of work’ but ‘actively seeking employment’
What are the four broad categories of unemployment
Seasonal, structural, cyclical, frictional
What is seasonal unemployment
When workers are unemployed at different times of the year
What is structural unemployment
Unemployment resulting from industrial reorganisation