Macroeconomics Y11 Topic 1: Macroeconomic Objectives - Economic Growth

Question 1

Economic Growth?

Answer 1

% Increase in real GDP economy over a period of time

Question 2

GDP?

Answer 2

GDP is the total value of output of goods and services produced in an economy over a period of time

Question 3

Nominal GDP?

Answer 3

The value of goods and services produced by a country in a given period of time

Question 4

Real GDP?

Answer 4

The value of goods and services produced by a country, having been adjusted for inflation

Question 5

GDP per Capita?

Answer 5

Total Value of output produced in an economy over a period of time which is adjusted for inflation and expressed per head of population

Question 6

Total Growth in GDP

Answer 6

The % change in the value of GDP over a period of time

Question 7

Economic Cycle?

Answer 7

Periods of time where economic growth fluctuates.

Question 8

Booms?

Answer 8

Peak of economic cycle where GPD is growing at its fastest

Question 9

Downturn?

Answer 9

Period in the economic cycle where GDP grows, but more slowly

Question 10

Recession?

Answer 10

Period of temporary economic decline which is identified by a fall in GDP for 2 consecutive quarters

Question 11

Recovery?

Answer 11

Period in the economic cycle where GDP starts to rise again. Businesses and consumers regain their confidence and economic activity is on the increase.

Question 12

Aggregate Demand?

Answer 12

Total demand in the economy

Question 13

Aggregate Supply?

Answer 13

Total amount of goods and services produced in a country at a given price level over a period of time

Question 14

Inflation?

Answer 14

The sustained increase in the average price level of goods and services in an economy in a given period of time

Question 15

Overheat?

Answer 15

When demand is rising too fast causing rpices to rise, a situation that governments might try to rectify by raising taxes or when the central bank might try raising interest rates to curb demand

Question 16

Unsustainable Growth?

Answer 16

Economic Growth that is not possible to sustain without causing environmental problems

Question 17

Human Capital?

Answer 17

Refers to the level of skill and education of the workforce

Question 18

National income?

Answer 18

The value of all income in the economy added together and included income wages, profits, dividends, interest and other income earned from abroad

Question 19

What happens when Economies grow over time?

Answer 19

The amount of goods and services provided by a country increases each year. This means that National Incomes will rise.

Question 20

What does it mean when the percentage change in real GDP is greater than 0?

Answer 20

Economy is Growing

Question 21

If the percentage in real GDP is less than 0?

Answer 21

The economy is shrinking

Question 22

How is GDP measured?

Answer 22

Output Measure - Total Value of the goods and services produced by all sectors of the economy

Expenditure Measure- The Value of the goods and services brought by households and by government, investement in machinery and buildings

Income Measure- the Value of income generated mostly in terms of profits and wages

Question 23

What is GDP used for?

Answer 23

Settling Interest Rates- If prices are rising too fast, the bank could increase interest rates to try and control them

Planning Economic Policy - If Economy is Shrinking the amount the gov. gets from taxes decreases

Compare Growth between different countries

Question 24

Limitations of GDP?

Answer 24

Hidden Economy –> Doesn’t capture Unpaid Work in official figures (caring for an elderly relative)

Inequality- GDP doesn’t tell us how income is split across a population. A rising GDP could result from the richest segment getting richer

GDP doesn’t mean higher standards of living (GDP often will increase in war due to increased spending)

Doesnt take into account well being

Question 25

What other Limitations are there of using GDP as a measure of economic growth?

Answer 25

Inflation
Population Changes
Statistical Errors
Home Produced Goods
Hidden Economy
External Costs

Question 26

Why is Inflation a limitation to using GDP as a measure of Economic Growth?

Answer 26

Inflation can make it appear that GDP has risen when actually it might not have

Question 27

Why are Population Changes a limitation to using GDP as a measure if Economic Growth?

Answer 27

An Increase In Population –> Increase Demand and Increased Workforce etc: –> Higher GDP

Doesn’t tell u the standrads of living in the country

Question 28

Why are Home Produced Goods a limitation to using GDP as a measure of Economic Growth?

Answer 28

Some goods and services are not Traded and therefore there is no record of these transactions taking place. National income will be understated

Question 29

Why is the Hidden Economy a limitation to using GDP as a measure of Economic Growth?

Answer 29

GDP figures become innacurate

Question 30

Why is External Costs a limitation to use GDP as a measure of Economic Growth?

Answer 30

Combustion of fossil fuels –> Good for economy

Bad for the environment

Question 31

What happens when their is Economic Boom?

Answer 31

High Confidence
Increasing Income
Increasing Spendng/ Demand
Low Unemployment
High Inflation 
High Profits
High Investment

Question 32

What happens during Recession?

Answer 32

Low Confidence
Low Spending
Low Income
Low Business Profit
High Unemployment
Low SoL
High Bankruptcies

Question 33

What happens during Downturn?

Answer 33

Falling Confidence
Falling Spending
Income and Unemployment Rising at a slower rate
Falling Inflation
Investment Rising at a slower rate