Measures of Economic Performance

Question 1

what is microeconomics

Answer 1

the study of individual markets within an economy e.g. housing

Question 2

what is macroeconomics

Answer 2

the study of the economy as a whole

Question 3

how can the macroeconomic performance of an economy be judged

Answer 3

by its rate of economic performance, rate of unemployment, rate of inflation and its current account balance on BofP

Question 4

when judging the performance of an economy, what is some of the criteria?

Answer 4

• how much is being produced - more produced, better economy
• unemployment - more working, better economy, less poverty
• resources being fully utilised
• inflation - high price rates disrupt economy
• live within mean - imports must balance exports (sort of)

Question 5

how is output measured? (economic growth)

Answer 5

gross domestic product (GDP)

-output of different countries can be compared and so can output over the years for one country - can see how performance is doing

Question 6

how does economic growth show economic performance

Answer 6

considered to be desirable - individuals prefer to consume more rather than fewer goods and services assuming wants are infinite

• higher economic growth is better, times of no economic growth (no output) lead to recession or depression - poor economy
  e. g. 1930s UK and US depression

Question 7

how does unemployment show economic performance

Answer 7

• represents a waste of scarce resources
• output could be higher is unemployed worked
• leads to poverty
• indicator of poor national economic performance
• linked to economic growth - need to workers for economy to grow

Question 8

how does inflation show economic performance

Answer 8

• low inflation is better than high
• high inflation means getting less for your money
• disrupts knowledge of prices in a market - high inflation, prices always changing, don’t know prices
• inflation above 5% bracket is a worry
  e. g. UK in 1970s, inflation reached 24.1% in 1975

Question 9

how does the current balance show economic performance

Answer 9

• if value of imports are more than exports then needs to be financed
• economic performance is good if exports are greater or around equal to imports
• would have to cut spending but this further reduced economic performance as it reduces economic growth