measures of economic performances 2.1.1-2.1.2

Question 1

what the the 4 macroeconomic indicators

Answer 1

-rate of economic growth
-rate of inflation
-level of unemployment
-state of the balance of payments

Question 2

Define GDP

Answer 2

is the standard measure of the value added created through the production of goods and services in a country during a certain period

Question 3

what does gdp stand for

Answer 3

gross domestic product

Question 4

what is the difference between real and nominal

Answer 4

NOMINAL gdp is the total value of all goods and services produced in a given time period and REAL is just nominal gdp that has been adjusted with inflation

Question 5

what is the difference between total and per capita

Answer 5

TOTAL gdp is the total value added created through the production of goods and services in a country during a certain period whereas PER CAPITA is when it is divided by the population

Question 6

what is the difference between value and volume

Answer 6

VALUE of goods/services shows what certain goods/services are worth. However, the VOLUME shows the number of goods/services that are produced

Question 7

define gdp per capita

Answer 7

the total gdp divided by the population of the country

Question 8

how to calculate gdp per capita

Answer 8

total gdp/population

Question 9

Define GNI

Answer 9

is the GPD plus the incomes earned by UK citizens abroad, minus the income earned earned by non-residents in the uk economy

Question 10

what does gni stand for

Answer 10

gross national income

Question 11

define recession

Answer 11

when the economic growth falls into the minuses for more than 2 consecutive quarters

Question 12

Define PPP

Answer 12

the exchange rate at which one nations currency would be converted into another to purchase the same amounts of a large group of products

Question 13

what does ppp stand for

Answer 13

purchasing power parties

Question 14

why may comparing the living standards of 2 countries with different currencies not be accurate

Answer 14

because the exchange rate may not truly reflects its true value/worth of the 2 currencies and so it wont give an accurate picture

Question 15

what overcomes the problem of the inaccuracy of the comparisons of countries with different currencies and how

Answer 15

the PPP and this helps as it adjusts the GDP per capita figures to take into account of the differing purchasing powers of the countries. This makes it a lot easier to have a more accurate and easy comparison

Question 16

what can gdp be used to compare

Answer 16

the living standards between countries and over time

Question 17

what can gdp per capita be used to compare

Answer 17

the economic performances between countries and over time

Question 18

what is the general trend of gdp and econ performance

Answer 18

the higher the countries gdp, the higher the economic performance

Question 19

what is the general trend between high gdp per capita and SoL

Answer 19

the higher the gdp per capita, the higher the SoL

Question 20

what are the limitations of using gdp and gdp per capita to compare standards and econ performance

Answer 20

doesn’t take into account of:
-extent of hidden economy
-public spending
-extent of income inequality
-other differences in SoL between countries
-comparisons with countries with different countries may be inaccurate

Question 21

explain the limitation of the extent of hidden economy

Answer 21

hidden economy is any economic activity that doesn’t appear in official figures and so if this isn’t taken into account then the measures aren’t really representative or accurate

Question 22

explain the limitation of public spending

Answer 22

some governments provide more benifits to others, such as unemployment benefits, universal benefit and free health care

Question 23

explain the limitation of the extent of income inequality

Answer 23

the distribution of of the income between rich and poor may be very different

Question 24

explain the limitation of other differences in SoL

Answer 24

other factors of SoL could be the number of hours worked, working conditions, different spending needs and more

Question 25

Define Inflation

Answer 25

the general sustained increase of prices over time

Question 26

Define Deflation

Answer 26

the general sustained decrease of prices over time

Question 27

Define Disinflation

Answer 27

when there is inflation but the prices are increasing at a slower rate

Question 28

what are the 2 ways in which inflation is measure

Answer 28

CPI (consumer price index) and RPI (retail price index)

Question 29

define CPI

Answer 29

CPI is a price index that measures the price changes in a basket of goods that a consumer faces

Question 30

define RPI

Answer 30

RPI is a price index that uses the same principles as CPI but includes house prices such as mortgages and council tax

Question 31

which one of RPI & CPI tends to have a greater value

Answer 31

RPI tends to have a greater value than CPI

Question 32

what is the exception for where cpi may tend to be higher than RPI

Answer 32

when interest rates are low

Question 33

how to calculate CPI

Answer 33

(cost of market basket in given year/cost of market basket in base year) x 100

Question 34

limitations of CPI

Answer 34

.doesn’t include housing payments
.the info given by the households in the surveys may be inaccurate

Question 35

limitations of RPI

Answer 35

.the info given by the households in the surveys may be inaccurate
.excludes all households in the top 4% of incomes
.the basket of goods only changes once a year so it might miss some short term changes in spending habits

Question 36

what are cpi and rpi used to determine

Answer 36

they are used to determine wages and state benefits and are also used to measure changes in UKs international competitiveness