Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics MACRO > Measurement of Macroeconomic Performance > Flashcards

Measurement of Macroeconomic Performance Flashcards

1
Q

what is the acronym for macroeconomic objectives ?

A

TIGER

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what does TIGER stand for?

A

Trade (x=m)
Inflation (stable, 2%)
Growth (sustainable, 2.5%)
Unemployment (stable, 4%)
Redistribution of wealth (equal)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what are the main macroeconomic indicators ? (ways the government track how their meeting their objectives)

A

GDP (real, nominal, per capita)
inflation rate (CPI, RPI)
claimant count & LFS
current account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what is the measure for economic growth ?

A

GDP

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what is the difference between real and nominal GDP ?

A

real - adjusted to inflation
nominal - not adjusted to inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is GDP per capita ?

A

value of GDP per head
(GDP/population)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what is inflation ?

A

Inflation is a sustained increase in the general price level of an economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what is the measure of inflation ?

A

CPI & RPI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what does CPI stand for, and what is it ?

A

consumer price index

measures household purchasing, basket of goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what does RPI stand for, and what is it ?

A

retail price index

CPI + housing costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what are the two measures of unemployment ?

A

claimant count
&
labour force survey (LFS)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what is the claimant count, how is it measured ?

A

counting number of people who are claiming unemployment related benefits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is the labour force survey (LFS), how is it measured ?

A

sample of 100,000 people are asked a series of questions to figure out whether they are:

-unemployed
-employed
-economically inactive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is the measure for productivity ?

A

output per worker

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what makes up the balance of payments ?

A

current account
capital account
financial account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what does the current account consist of ?

A

trade of goods & services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what do index numbers measure ?

A

the comparison between years, and to measure the magnitude of change overtime.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what is the index numbers calculation ?

A

(current year/ base year) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what is the target rate of economic growth ?

and why?

A

2-3%, growth at this rate is less likely to cause excessive demand-pull inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what does strong economic growth look like ?

A

higher incomes
lower unemployment rates
better government budgets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what is the target rate of inflation ?

A

2% (CPI)

22
Q

what is the target rate of unemployment ?

A

4-5%

23
Q

why is it impossible to achieve 100% employment ?

A

there will always be a level of frictional unemployment (the time unemployed between leaving one job to find and pursue another)

24
Q

when real GDP increases what happens to the unemployment rate ?

A

it falls

25
Q

when real GDP decreases what happens to the unemployment rate ?

A

it rises

26
Q

what is the current account ?

A

It represents the flow of trade (exports - imports) in goods and services

27
Q

what does the government aim for in the current account ?

A

equilibrium (exports = imports)

28
Q

what happens if the governments expenditure exceeds its revenue (expenditure > revenue) ?

A

there is a budget deficit

29
Q

how does the government get rid of this debt ?

A

it has to be financed through the public sector (taxation, decrease in government spending)

30
Q

what happens if government debt becomes too high ?

A

lenders being to lose confidence in the governments ability to repay the debt

the government will have to raise the interest rate it offers to lenders, which makes borrowing more expensive

31
Q

what macroeconomic objectives does economic growth conflict with ?

A

inflation (prices for remaining resources bid up)

environmental sustainability (pollution, negative externality,)

32
Q

what are macroeconomic indicators ?

A

metrics that are used to measure economic progression towards a macroeconomic objective

33
Q

what is the difference between nominal and real GDP ?

A

real GDP is adjusted to inflation, nominal is not

34
Q

what is GDP per capita ?

A

The real GDP is divided by the total population

35
Q

what is consumer price index (CPI) ?

A

measures the change in the price of a fixed basket of consumer goods bought by a typical household

36
Q

what is retail price index (RPI) ?

A

CPI + house purchasing costs

37
Q

what is the formulae for CPI ?

A

(cost of basket in year X / cost of basket in base year) x 100

38
Q

what is the labor force survey (LFS) ?

A

An extensive survey is sent to a random sample of households every quarter (60,000 households in the UK)

Respondents self-determine if they are unemployed based on the following ILO criteria:
- Ready to work within the next two weeks
- Have actively looked for work in the past month

39
Q

what is the claimant count ?

A

number of people claiming job seekers allowance (JSA) or unemployment related benefits

40
Q

what does the balance of payments measure ?

A

the inflows and outflows of money in a country

41
Q

what causes a budget deficit ?

A

gov spending > tax revenue

42
Q

what is an index number, and why do economists use it ?

A

a tool economists use to track changes in prices, quantities, or economic activities over time.

it makes economic comparisons between countries easier.

43
Q

what is the basic formula for index numbers ?

A

(x year/ base year) x 100

Worked example:
An economy’s GDP increased from $500 billion in 2017 to $540 billion in 2019. Using 2016 as the base year, establish the value of the index for GDP in 2018 and comment on its significance

Step 1: Calculate the Index for 2019 using the formula

index for 2019 = (real GDP 2019/ real GDP base year) x 100

index for 2019 = ($540 billion/ $500 billion) x 100

index for 2019 = 108

Step 2: Comment on the value

     The value of the GDP has increased by 8 percent in this period
44
Q

how do you calculate CPI ?

A

(cost of basket in current year/ cost of basket in base year) x 100

45
Q

from the CPI how do you calculate the inflation rate ?

A

(new CPI - previous CPI) / (previous CPI) x 100

46
Q

what is the definition of national income ?

A

total value of the new output of an economy over a period of time

47
Q

what does a fall in national income indicate ?

A

the economy is going into a recession

48
Q

what does a rise in national income indicate ?

A

the economy is experiencing economic growth

49
Q

what is GNI ?

A

it represents the total income earned by a country’s residents, domestically and abroad

50
Q

what is the formula for GNI ?

A

GDP + (net income from abroad)

51
Q

what are 3 evaluations can we get from national income data ?

A
  • compares changes in living standards
  • evaluates effectiveness of economic policy
  • compares data across countries
52
Q

why can comparing living standards between countries using GDP per capita be inaccurate ?

A

currency values are different

Economics MACRO (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions