Macro 1: Macroeconomics Indicators and Government Objectives Flashcards
What is macroeconomics?
Economic activity across many industries within an entire regional, national or global economy.
What is microeconomics?
Production and trade of goods or services in one specific industry.
What are macroeconomic indicators?
Data which is commonly used to measure the performance of an economy.
What are examples of macroeconomic indicators?
real GPD, real GPP per capita, Consumer Prices and Retail Prices Indices (CPI/RPI), measures of unemployment, productivity and the balance of payments on current account.
What does the mnemonic ‘TIGER’ represent?
The most significant macroeconomic indicators.
What does ‘TIGER’ stand for?
Trade balance, Inflation (low), Growth (sustainable), Employment (high), Redistribution of wealth
What is economic growth (indicator) and how is it measured?
An increase in the production of goods and services in one period compared with a previous period. The value of output of the economy (national income). It’s measured in nominal (unadjusted) or real (adjusted to remove inflation) terms. It’s also measured in terms of GNP/GDP and measures the standard of living.
What does GDP measure?
The market value of all the finished goods and services produced within a country in a year.
What is the difference between GDP and Real GDP?
Real GDP is used to compare the economy over time as it controls for changes in price. Nominal GDP is when prices increase so the GDP number goes up but it’s driven by inflation. Goods and services aren’t actually increasing.
What is GDP per capita?
GDP divided by the midyear population.
What aims do the government have regarding economic growth?
Sustainable economic growth for the long run. They want to increase it to improve living standards.
What is the difference between GDP, GNP and GNI?
Gross national income (GNI) measures the income earned by citizens operating outside of the country + the GDP
Many citizens employ their resources outside of a country’s borders - and then send the income home.
Gross national product (GNP) takes it one step further
GDP + income from abroad - income sent by non-residents to their home countries
Gross National Product is like GDP but it includes the income made by a nation’s residents from investment abroad so GDP measures the total output of goods and services from only that nation. Gross National Income is the same as GNP.
What difficulties are there in measuring economic growth?
Lack of statistical data.
What definitions are there for inflation?
Demand inflation is when there are increases in the number of people who want something whose supply can’t keep up. Cost-push inflation is where the cost of businesses rise and is pushed onto customers, eg. by increasing menu prices. This could be because of land rent and raw material prices increasing, or workers asking for more money.
How is inflation measured?
By percentage. It compares the cost of things today with how much they cost a year ago. The average increase in prices is the inflation rate.
What differences are there between RPI and CPI?
They’re both indices that seek to measure the current rate of inflation. Consumer Price Index is calculated using a ‘basket of goods’ that reflects what consumers would tend to buy. This basket is then averaged to approximate the price level, and compared to previous data. Retail Price Index incorporates the cost of living, such as rent, in its inflation level, so RPI tends to be higher.
What rate of inflation is the target rate in the UK?
2%
What is the definition of unemployment?
Individuals of working age who aren’t currently employed but seeking work.
What is the unemployment level and what is the unemployment rate?
4.4% (4.1% the previous year)
Unemployment rate (%) = number of people unemployed / size of labour force x 100
How are unemployment levels and rates measured?
Surveys.
What is the difference between the claimant count and the labour force survey as measures of unemployment?
Claimant count is people claiming job seeker benefits (JSA) for unemployment. The labour force survey is the number of people who report they are available and looking for work but can’t find it, don’t have to be seeking benefits. Based on a monthly sample of people and used to produce an estimate of the national unemployment level.
What are the four broad categories of unemployment?
Frictional
Seasonal
Cyclical
Structural
What does the current account on the balance of payments measure?
A country’s imports vs. exports.
What does the government aim to achieve with regards to trade?
To enhance economic prosperity for the UK, through the development and delivery of a UK trade policy that delivers benefits for business, workers and consumers across the whole of the UK.
