macroeconomics - key economic indicators Flashcards
Define GDP. What is a relevant macro goal?
gross domestic product: total monetary value of final goods and services produced in an economy, within its geographical boundaries, within a specific time period
relevant macro goal: economic growth
Which of the following indicators are adjusted for inflation:
- real GDP
- real GDP per capita
- nominal GDP
1 and 2
What is the formula for Real GDP?
real GDP = nominal GDP/CPI current year X CPI base year
Define GNI.
gross national income: total value of final goods and services produced by locally-owned factors of production within a specific time period
Define CPI and state a limitation of this indicator.
consumer price index: a measure of the price of a fixed basket of goods and services commonly purchased by a typical household with respect to a base year
limitation: CPI does not take into account changes in quality of g&s
How is inflation rate calculated?
(hint: use CPI)
inflation rate (current year, %) = (CPI current year - CPI previous OR base year) / CPI previous OR base year X 100%
Define ‘Unemployment Rate’. State two limitations of this economic indicator.
measurement of the proportion of the labour force who are unemployed but actively seeking a job
limitation 1: Unemployment rate does not distinguish between high-paid and low-paid employed individuals.
(i.e. even if a country has a low unemployment rate, the majority of the people might be holding down low-skilled jobs with meagre pay and therefore, have a low SOL)
limitation 2: in large countries (e.g. China), unemployment rates may be inaccurate due to information failure and inability to track (e.g. freelance gigs & underground economy)
Define ‘labour force’.
total number of people in the workforce aged 15 & above who are able and willing to work, including both employed and unemployed persons
Define ‘unemployed person’.
person aged 15 & above who is willing and able to work, actively seeking for a job but unable to find a job
Define ‘Gini Coefficient’. State the possible impacts of a high Gini index on the economy.
an indicator from 0-1 measuring the level of income inequality in a country
(a Gini index of 0 represents perfect income equality, while an index of 1 implies perfect income inequality)
high Gini index suggests high income inequality –> greater societal friction + potential bias in the economy –> decrease in SOL
Define ‘Balance of Trade’. State the formula.
a record of the difference between the monetary value of a country’s imports and exports
formula: BOT = total revenue of exports (TRx) - total expenditure on imports (TEm)
What does TRx > TEm indicate?
What does the converse (TRx < TEm) indicate?
trade surplus, trade deficit
