Measures of economic importance Flashcards
what are the factors of production
Capital
Enterprise
Labour
Land
what are factor incomes
Interest
Profits
Wages
Rent
examples of transport payments
- unemployment benefits
- state pension
- tax credit
what are the three leakages in the circular flow of income
Imports
Taxes
Savings
what are the three injections in the circular flow of income
Exports
Government Spending
Investments
what are exports
spending by foreigners in goods and services made in the uk
who spends on investment
firms
what is GDP
the value of all then goods and services produced in an economy
what is the nominal value
provides a measure in simple monetary terms
what is the real value
this provides a measure where the nominal value has been adjusted for inflation
what is the total
provides an overall aggregate total
what does per capita mean
divides the total by population
what are some criticisms of GDP
- does not take into consideration health, education and social structure
- quality of life not measured
what is GNI
gross national income - measures income, wages, services and investments generated by the countries citizens
what is GNP
gross national product - the market value of all the goods and services produced in one year by labour + property supplied by the citizens of a country
what is HDI
human development index - measures a broader definition of well-being and provides a composite measure of 3 basic dimensions of human development
what is GPI
genuine progress indicator - takes everything that GDP uses into account but adds other figures that that represent the cost of the negative effects related to economic activity
what is HPI
human poverty index - concentrated in the deprecation in the 3 elements of human life
what is the Gini Coefficient
- differences in national income equality around the word
- between 0 - 1
- 0 = perfect equality
what is the easterlin paradox
states that a point in time happiness values are directly proportional with income but over time the long-term growth rates of happiness and income are not significantly related
what are the two measures of unemployment
- claimant count
- uk labour force survey
what is the claimant count
- this provides monthly data regarding the number people claiming JSA
what does JSA stand for
Job seekers allowance
define unemployment
actively seeking employment
conditions of JSA
- attending a session with a ‘work coach’ at a DWP office
- must be seeking work
- must complete online tasks to prepare for interviews
- work a maximum of 16 hours per week
- have less than 16,000 in savings
what does economically inactive mean
the people are neither employed nor unemployed. they are not seeking work or available to start work. they are not included in unemployment data
what does the amount of JSA depend on
the system is a contribution - based, depending on how much National Insurance has been paid by the worker during the previous two years
limitations on the claimant count
- stigma attached to claiming benefits
- stricter eligibilty
what does underemployment mean
workers who may not fully utilise their skill set or the worker may be working fewer hours than they would like
what is the concept of hysteresis
current and future value will be impacted by historical events
how does hysteresis work when applied to unemployment
the longer somebody is unemployed, the harder it is for them to find work
what are the 6 types of unemployment
- frictional
- cyclical
- structural
- natural
- seasonal
- real wage
what is frictional unemployment
unemployment caused by individuals searching for work, or waiting to start a new job
what is cyclical unemployment
unemployment caused by changes in the business cycle. labour is a form of derived demand therefore is there is a recession and demand for goods and services fall there will be a fall in demand for labour
what is structural unemployment
combination of occupational and geographical immobility of labour. caused by changes in the structure of an economy
what is natural unemployment
combination of frictional and structural unemployment. it is the lowest level of unemployment a health economy can sustain without causing inflation
what is seasonal unemployment
temporary work that is created and then lost when there is change in seqsons
what is real wage unemployment
occurs when real wages are too high
what is the labour force survey unemployment count
- a person aged 15 or over without a job during a given week
- available to start a job within the next two weeks or actively having sought employment during the last 4 weeks
what are the 4 components of the balance of payments
- current account
- financial account
- capital account
4: net errors + omissions (balancing tools)
what are the 4 components of the current account
- trade in goods
- trade in services
- investment income
- transfers
what are the three components of the financial account
- portfolio investment
- foreign direct investment
- reserve
name three examples of portfolio investment
- bonds
- derivatives
- shares
examples of a reserve
- gold
- currency
what components make up the trade balance of the current account
- trade in goods
- trade in services
what components make up the income balance of the current account
- investment income
- transfers
what is a current account deficit
value of M > value of X
what is a financial account deficit
spend more in portfolio investment in foreign countries than their own
what is a current account surplus
value of M < value of X
what is a financial account surplus
spend more in portfolio investment in their own country rather than foreign countries
reasons for a current account surplus
- low valued exchange rate
- competitiveness
- high domestic saving ratio
- protectionism
- foreign direct investment
why does a low values exchange rate cause a CA surplus
exports are more price competitive
why does competitiveness cause a CA surplus
low unit labour costs from high productivity means lower prices. dynamic efficiency would mean higher quality
why does a high domestic saving ratio cause a CA surplus
increased saving of people wi mean less demand for imports. if MPM is low then a current account surplus in more likely
why does protectionism cause a CA surplus
tariffs, quotes and regulations may reduce the levels of imports
why does foreign direct investment cause a CA surplus
foreign companies invest in a country and then export to the rest of the world. inflow to FA - profits being sent back to the country of origin would be CA outflow
reasons why a financial deficit isn’t always bad
- if the exchange rate is weak: CA deficit can self-correct itself into a surplus - if defective is caused by an increase in imports, the supply of the currency will increase
- leads to an increase in exports therefore self-correcting the CA deficit into a surplus
describe the J curve
what does the j curve depend on
if the marshall-lerner condition is true
what is the marshall- lerner condition
PED of X + M > 1
