macro economic objectives and indicators Flashcards
economic growth definition?
the change in national income measured over a period of time
(how much the value of the output produced in an economy has grown over a period of time)
What is price stability?
how fast the average level of prices of a range of goods and services rises over a period of one year
What are the macroeconomic objectives?
- economic growth
- price stability
- minimising unemployment
- stable balance of payments on current account
what is a policy conflict?
- attempts to achieve one economic objective move us further away from another economic objective
Give examples of policy conflicts?
minimising unemployment and achieving price stability.
- reducing unemployment often comes at the expense of prices rising
What is GDP?
- gross domestic product - measure of the national income of the economy. Based on the value of all incomes earned in the economy over a period of time
What does real GDP measure?
the value of GDP after adding the effect of price changes (inflation)
What is normal GDP growth per year?
2% and 3%
What is real GDP used for ?
comparison between countries in terms of standard of living
How is real GDP per capita calculated?
real GDP / population level
What does per capita mean?
a variable adjusted to give an average amount per person
What do CPI and RPI measure?
measure of price level which records rate of inflation
How do the CPI and RPI help measure inflation?
they measure the prices of goods and services typicaly bought by households in the UK
What does unemployment mean?
those of working age who are currently out of work but are actively seeking work
What is the labour force?
those of working who are either in work or actively seeking work
What are the UKs two main measures of unemployment?
- claimant count
- labour force survery
What is the claimant count?
the measure of unemployment in the UK that counts those who are recieving unemployment benefits
What is the labour force survey?
based on a monthly sample of people, records those who report they are looking for work but cannot find it, regardless of benefits
What is the unemployment rate?
the number of unemployed people expressed as a percentage of the current labour force
How do you calculate unemployment rate?
number of people unemployed / size of labour force x100
What does productivity measure?
a measure of efficiency comparing the level of output with the level of inputs
What is labour productivity?
the output of the workforce compared with the amount of labour used to produce the output
What is capital productivity>
the output per item of capital equipment measured over a period of time
What does economic growth in the long run involve?
comes from improvements in productivity
How do you improve productivity?
making workers more efficient in producing output and increasing efficiency of the economy’s capital equipment
What is the balance of payments?
the record of all financial transactions between the UK and the rest of the world
What are the three balance of payment sections?
- current account
- capital account
- financial account
Define current account?
- part of the balance of payments which looks at income flows earned through either trade in goods and services or the reward for investments located overseas
What is the current account made up of?
- exports of goods and services (produced in UK and sold abroad)
- imports of goods and services ( produced abroad, purchased by UK)
What is the balance of trade ?
the differance between imports and exports of goods and services
What is a trade surplus?
value of exports > value of imports
What is a trade deficit?
value of exports < value of imports
What is a current acount deficit?
flows of money from trade and other incomes out of the country are greater than the equivalent flows into the country
What is an index number?
a number designed to be used to show the size of changes in a variable over time
What are index numbers useful for?
making comparisons over a period of time
How do you calculate index number?
new price / base year price x100
What does CPI stand for?
consumer price index
how is inflation rate calculated in the UK
anual % change in the CPI
what is the price index?
an average level of prices based on a selection of goods bought by the typical household
How is CPI calculated?
using price data from a variety of differant products bought by an imaginary family
based on basket of goods and services
What is the basket of goods and services
the selection of prducts to be included within the price index based on typical household purchases
What type of index is CPI?
weighted price index
What is a weighted price index?
an average level of prices adjusted so that the price changes in popular items affect the price index more then price changes in less popular items
What are problems with the CPI?
- never really reflects anyones exact spending pattern
- the basket may include goods not everyone buys
- regular updates to the basket mean we are not comparing like with like
- no account is taken for the quality of the item
