Macro economics Flashcards
How is economic growth measured?
GDP
What are the main or “typical” objectives of macro economic policy?
- Price Stability (CPI Inflation of 2%)
- Growth of Real GDP (National Output)
- Falling Unemployment / Raising Employment
- Higher Average Living Standards (national income per capita)
- Stable Balance of Payments on the current account
- An Equitable Distribution of Income and Wealth
What was Thatcher and David Cameron main macro-economic objectives?
Thatcher: Getting rid of inflation (1979 is 27%)
David Cameron: Paying off UK debt
What’s GDP?
Gross Domestic Product:
The sum of all goods and services, or level of output produced in the economy over a period of time
What’s Short run economic growth?
Growth of real output resulting from unused resources, including labour, thereby increasing the economy’s efficiency
What’s Long run economic growth?
An increased in the economy’s potential level of output, and an outward shift of the economy’s PPF
What’s Nominal GDP?
GDP measured at the current market price, without removing the effect of inflation
What’s Real GDP?
Measure of all goods and services produced in an economy, adjusted for price changes or inflation
What’s Full employment?
It is the level of employment occurring at the market-clearing real-wage rate, where the number of workers whom employers wish to hire = workers willing to work
What’s Unemployment?
Willing or able to work at current minimum wage but is not working.
What’s Claimant count measure of unemployment?
Measures according to those people who are claiming unemployment related benefits
What’s Labour force survey measure of unemployment?
A quarterly sample survey of households. The survey seeks information on respondent’s personal circumstances and their labour market status during a period of 1-4 weeks
What’s Inflation?
A persistent or continuing rise in the average price level
What’s Deflation?
A persistent or continuing fall in the average price level
What’s Disinflation?
When the rate of inflation is falling but still positive
What’s CPI and how is it collected?
Consumer Price Index. The official measure used to calculate the rate of consumer price inflation in the UK. It calculates the average price increase of a basket of 700 goods & services
What’s RPI?
Retail Price Index. The older measure used to calculate UK rate of inflation
What’s Indexation?
The automatic adjustment of items such as pensions and welfare benefits to changes in the price level, through the use of price index
What’s Balance of payments?
The record of all currency flows into and out of a country over a period of time
What’s Current account?
Measures all the currency flows into and out of a country in a particular time period in payments for exports and imports, together with income and transfer flows
What’s Exports?
Domestically produced goods or services sold to residents of other countries
What’s Imports?
Goods and services produced in the other countries and sold to residents of this country
What’s Balance of trade?
The difference between the money value of a country’s imports and its exports
Balance of Trade deficit?
The money value of a country’s imports exceeds the money value of it’s exports
Balance of Trade surplus?
The money value of a country’s exports exceeds the money value of it’s imports
What’s a Balanced budget?
When government spending equals government revenue, which is mostly tax revenue
What’s a Budget deficit?
When government spending is greater than government revenue
Define positive output gap?
Occurs when the actual output is greater than potential output. (Actual GDP is above GDP trend line)
Define negative output gap?
Occurs when the actual output is less than potential output. (Actual GDP is below GDP trend line)
Define AD?
Aggregate demand is the total planned spending on real output produced within the economy.
Formula for aggregate demand?
Consumption + Investment + Goverenment Spending + (Export - Import) = AD
