Measures Of Economic Performance Flashcards
What is economic growth?
The total value of goods and services produced by a country in 1 year.
What is the meaning of real?
Means that inflation has been taken into account.
What is a recession?
When an economy suffers two consecutive quarters of negative economic growth.
What is the difference between nominal and real GDP?
Real GDP is nominal GDP adjusted for inflation.
What is GDP per capita?
GDP divided by total population.
What is the difference between value and volume measures of GDP
The volume of output measures the number/amount of goods produced
The value of output measures the amount of goods produced multiplied by the price at which they are sold at.
What is GNI?
Measures income by a country both domestically (GDP) and via net incomes from overseas.
What are purchasing power parties?
(PPP’s)
They are used to compare GDP in different countries, and take into account the cost of a ‘basket of goods’
that could be bought in each of the countries being compared.
Define quality of life.
A measure of living standards that takes into account more than just income.
What are some limitations of using GDP to compare living standards between countries?
Difference in population, (per capita is required)
Different rates of inflation, (real GDP is required)
Methods of calculation and reliability of data might differ
Difference in income distribution
What does the UK government do to gage national well-being?
Undertakes regular surveys of personal well-being that makes estimates of overall satisfaction with life.
What is inflation?
A sustained rise in the general price level.
What is deflation?
A sustained fall in general price level.
What is disinflation?
A fall in the rate at which general price level is rising.
What is CPI?
The measure of inflation used for targeting in the UK. It’s does not include housing costs and is also used to make international comparisons of inflation rates.
It uses a bass year (100) and consists of a weighted average of items (700) people buy.
How is CPI calculated?
The living costs and food survey collets information on around 7,000 UK households and creates an average price of the 700 most purchased items.
What are the limitations of the CPI?
Doesn’t take into account housing costs.
The list of 700 items are only changed once a year.
There are sampling issues, households data might not be very accurate.
What is CPIH?
Extends CPI to include housing costs and council tax.
What are the 3 main causes of inflation?
Demand-pull inflation
Cost-push inflation
Increased money supply
What is demand-pull inflation?
When aggregate (total) demand increases faster than the aggregate supply.
What is cost-push inflation?
When aggregate supply decreases.
What are the effects of inflation on consumers?
Real income would decrease.
Value of savings will decrease if inflation is higher than interest rates.
Loans and mortgages will become more manageable for consumers if inflation is higher than interest rates.
What are the effects on inflation for firms?
Fall in exports, competitiveness will fall if inflation is high.
Lower profits, cost push is likely to cause a decrease in profits.
How does inflation effect the government?
Fall in real value of national debt.
Increased inequality, real incomes of many low income families will decrease.
How does inflation effect workers?
Unemployment, low inflation suggests low demand which can cause unemployment.
What is the level of employment?
The number of people in work.
What is the employment rate?
The number of people in work as a percentage.
What is the claimant account?
The number of people claiming unemployment benefits.
What is the international labour organisation and the UK labour force survey?
Labour force survey is a survey of a sample of people between ages 16 and 65 that have been out of work in the last 4 weeks and are ready to start work in 2 weeks.
What is the unemployment rate?
The number of people out of work as a percentage.
What is underemployment?
Those individuals who are seeking or available for additional work.
Who are classed as economically inactive?
Those without a job but who are not classed as unemployed.
What are the 5 types of unemployment?
Cyclical
Structural
Frictional
Seasonal
Classical (real wage)
