Measures of Economic Performance Flashcards
What do we use to measure output?
GDP (Gross Domestic Product)
What is Economic Growth?
The rate of change of output
Why is unemployment a major problem in society?
- Represents a waste of scarce resources
What is unemployment an indicator of?
Poor national economic performance
Are Economic Growth and Unemployment linked?
YES
Why do fast growing economies tend to have low unemployment?
- More workers are needed to produce more goods and services.
What do low levels of economic growth associate with?
Rising levels of unemployment
What can cause unemployment to rise?
- Technology taking over humans jobs
- In a recession businesses make redundancies to save money
Define Inflation?
- Is the increase in average prices in an economy
Problems with rising Inflation?
- Causes prices to rise
- Means the value of what savings can buy falls
- Disrupts the knowledge of prices in a market (with prices constantly changing consumers can’t compare prices to get the best deal)
What is the target inflation?
2%
Who controls interest rates?
Monetary Policy Committee
What is deflation?
- Is the decrease in average prices in an economy
What is meant by a nations value of its imports?
- Is a nations spending on foreign goods and services
What does the Balance of Payments show if a country has a sound economy?
- If a countries exports are greater or equal to its imports
What is a Current Account Surplus?
- When exports of goods and services are greater than imports.
What is a Current Account Deficit?
- Where imports exceed exports
When do deficits become a problem?
- When foreign banks and other lenders refuse to lend any more money.
How do countries restore confidence during a credit crunch?
- Cutting public spending - which leads to less demand for imports
However; what does reduced public spending also lead to?
- Reduced economic growth and rising unemployment
