Macro L2 Flashcards
Equation for index number:
Index number = preferred period/ base period x 100 (round to 1dp)
What is usually the base period?
The beginning period
What are measurements of nominal values?
Prices that are current at the time of the transaction
What are measurements of real values?
Quantities produced after removed effect of price changes
Equation to convert nominal to real measurements:
Price index = nominal GDP/real GDP x 100
Equation to convert nominal to real percentage change:
real percentage change = nominal percentage change - inflation percentage
Economic growth is either:
- Increase in the real value of goods + services
- Increase in the productive capacity of an economy ( caused by quantity and quality changes in factors of production)
GDP measurement features:
- shows total output of economy
- focuses on domestic economy
- best to measure quantity of resources
GNI measurement:
- focuses on income flows between countries
- best to measure standard of living
What is actual economic growth represented by?
Percentage rate of growth of GDP/GNI
Equation for GDP/GNI per capita:
GDP per capita = GDP in a period/ pop in a country
Inflation:
Increase in general price level for goods + services
Deflation:
Decrease in general price level for goods + services
Disinflation:
Fall in rate of inflation (prices rising at a slower rate)
Why is deflation sometimes perceived to be negative?
People would expect lower prices so there would be a fall in demand as they postpone purchases
Employed:
Self-employed or working for firms
Unemployed:
In the workforce but without a job
Economically inactive:
Not active in the workforce –> may be sick, student
What other group of people does economically inactive include?
Discouraged workers, who have given up finding work
Underemployment:
The overqualified/ working less hours than they wish
Name one macroeconomic policy objective and what it means.
Full employment is when all available labour resources are being used
Why does full employment not always mean zero unemployment?
If there wasn’t some unemployment (due to job-seekers), there would be constant upward pressure on wages and prices
What are the two measures of unemployment?
- Claimant count of unemployment (JSA)
- ILO unemployment rate
What is the JSA?
Jobseeker’s Allowance, which is people claiming a benefit as they are out of work and ‘prepared’ to work
What are the advantages and disadvantages of the claimant count of unemployment?
Advantages:
- Shows who’s claiming to be out of work
Disadvantages:
- Includes those who are unavailable or not prepared to work as well
- Excludes those who aren’t claiming the benefit but also need work
- Starts at 18
What are the advantages and disadvantages of ILO unemployment rate?
Advantage:
- Shows those available, seeking work and without a job
- Starts at 16-17 years of age
Disadvantage:
- Based on sample evidence, which is extrapolated and therefore not representative
Hyperinflation:
Very high rates of inflation where price levels increase by more than 50% per month
How to measure each of the areas of macroeconomic performances?
Economic growth –> GDP, GNI, PPP
Inflation –> CPI/RPI/CPIH (consumer price index for housing as well)
Unemployment –> Claimant count, ILO unemployment rate
What is a CPI?
Consumer Price Index –> overall change in consumer prices
- Doesn’t include housing
- Every year certain important items are added/removed
RPI:
Retail Price Index
What are the balance of payments account and how is it divided?
Record of all financial dealings. It is divided into:
- Current account = Record of purchases of goods + services
- Capital + Financial account = Record of money associated w/ savings, investment (speculation) + currency stabilisation
What signs are given to an import and an export?
Import –> negative sign
Export –> positive sign
What is a trade in goods called?
Trade in visibles
What is a trade in services called?
Trade in invisibles
How is balance of trade calculated?
Exports - imports
What does current account consist of?
Balance of trade in goods and services + primary income + secondary income
How is current balance calculated?
Balance of trade in goods + Balance of primary and secondary income
Primary income:
Money which flows in and out of a country resulting from employment or investment
Secondary income:
Movement of money between countries which aren’t paying for goods and services and are not the result of investment
What is the current account status if exports > imports?
Current account surplus
What is the current account status if imports > exports?
Current account deficit
What can current account deficit be caused by?
- Excessive gov spending
- Buying too many imports
- Borrowing excessively
Limitations of increased GDP:
- To what extent are people spending even if GDP increases?
- What about hidden economy?
- Does not necessarily mean there is an improvement in standard of living
- Does not account for (regional) inequality
- Worsened environmental impact
Purchasing Power Parity
Measurement to compare spending power between two or more countries
What does PPP allow?
Productivity and standard of living between countries to be compared
Why may people not claim the JSA?
- Stigma
- High savings
What is the Labour Force Survey?
Survey by the International Labour Organisation of those looking for work in the past 4 weeks and those available to work in the next 2
What does a fall in exchange rate actually mean?
The currency has weakened
How to calculate AD?
Aggregate demand = consumption + investment + gov spending + (exports - imports)
