Measuring Economic Performance

Question 1

What is macroeconomics

Answer 1

Economy as a whole

Question 2

What are the four macroeconomic indicators used to measure economic performance

Answer 2

Rate of inflation

Rate of economic growth

State of the balance of payments

Level of unemployment

Question 3

Define gdp

Answer 3

Measure of economic growth

Question 4

How is economic growth measured

Answer 4

Change in output over a period of time

Question 5

Define national output

Answer 5

All goods/services produced by a country

Question 6

What are the two ways output are measured

Answer 6

Volume - add up qty of goods + services produced in 1yr

Value - value of all goods + services produced in 1yr

Question 7

What measure out output is national output measured in

Answer 7

Value (this is gdp)

Question 8

What is the rate of economic output

Answer 8

Speed at which the national output grows over a period of time

Question 9

What are booms

Answer 9

Long periods of high economic growth

Question 10

What is a recession

Answer 10

Negative growth for 2 consecutive quarters

Question 11

What is a slump

Answer 11

A long recession

Question 12

What is an economic depression

Answer 12

Sustained economic downturn for a long period of time

Question 13

What is nominal gdp

Answer 13

Gdp that isn’t adjusted for inflation

Question 14

Define real gdp

Answer 14

Gdp that is adjusted for inflation

Question 15

What does gdp per capita indicate

Answer 15

Standard of living

Question 16

How is gdp per capita calculated

Answer 16

Total gdp / population size

Question 17

Define gni

Answer 17

Gross national income

Gdp + net income from abroad

Question 18

Define gnp

Answer 18

Gross national product

Total output of citizens in country

Question 19

What do index numbers represent

Answer 19

Percentage changes

Question 20

What are index numbers useful for

Answer 20

Making comparisons over a large period of time

Question 21

What is a base year

Answer 21

First year (index numbers)

Question 22

What are the two ways you can define inflation

Answer 22

A sustained rise in the average price of goods + services over a period of time

A fall in the value of money

Question 23

What happens when there is negative inflation / deflation

Answer 23

Average price decreases

Question 24

Define hyperinflation

Answer 24

Price rises rapidly, money quickly loses value

Question 25

Define disinflation

Answer 25

Rate of inflation is slowing down

Question 26

What are the two main measurements used for inflation

Answer 26

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

Question 27

What occurs in the RPI

Answer 27

Two surveys are carried out 1st - survey of around 6000 households (living costs + food survey) Used to find out what people spend their money on 2nd - based on prices - measures the change in price of around 700 of the most commonly used goods + services (items chosen based on the living costs + food survey)

Question 28

What occurs in the CPI

Answer 28

Consumer price index Measured very similar to RPI however 1) some items are excluded (mortgage interest payments, council tax) 2) calculates using a slightly different formula 3) a larger sample of the population is used for CPI

Question 29

What is the official measure of inflation in the UK

Answer 29

CPI

Question 30

What are the limitations of the two main measurements of inflation

Answer 30

- excludes all households in top 4% of incomes - CPI covers a broader range of the population , however excludes some items - information given by a household might be inaccurate - can give inaccurate representation of non typical households

Question 31

What does RPI and CPI help determine

Answer 31

State benefits + wages Used to measure changes in UK international competitiveness

Question 32

What are the two ways of defining unemployment

Answer 32

Number of people who are looking for a job but cannot find one Number of people out of work as a % of the Labour force

Question 33

Define labour force

Answer 33

People who are willing and able to work

Question 34

What are the two ways of measuring unemployment

Answer 34

Claimant count Labour force survey

Question 35

Define claimant count

Answer 35

Number of people claiming unemployment related benefits from government

Question 36

Advantages of claimant count

Answer 36

Easy to obtain (count JSA) no cost in collecting Updated monthly, so always current

Question 37

Disadvantages of claimant count

Answer 37

Can be manipulated by government to make it seem smaller Excludes people looking for work but aren't eligible to claim JSA

Question 38

Define labour force survey

Answer 38

Uses a sample of the population, asks people who aren't working if they are currently seeking work

Question 39

Advantages of labour force survey

Answer 39

More accurate than claimant count Internationally agreed measure, easier to compare with other countries

Question 40

Disadvantages of labour force survey

Answer 40

Less upto date than the claimant count Expensive to collect+put together Sample may not represent the population as a whole

Question 41

Why do government want to keep track of unemployment

Answer 41

High unemployment - bad performing economy Unused labour in economy, fewer goods +services being produced -> lower income + less spending -> impacts companies

Question 42

What is balance of payments

Answer 42

International flows of money

Question 43

What does it mean when you pay for imported goods

Answer 43

Money flowing out of the country

Question 44

What does it mean when you get payments from export goods

Answer 44

Flow of money intro country

Question 45

Define current account

Answer 45

Records the international exchange of goods + services

Question 46

What are the four sections to the current account

Answer 46

Trade in goods (visible trade) Trade in services (invisible trade) International flows of income earned as salaries, interest, profit Transfers of money

Question 47

What does it mean when the amount of money flowing into a country exceeds the amount flowing out

Answer 47

Surplus

Question 48

What does it mean when the amount of money leaving the country exceeds the amount of money coming in

Answer 48

Deficit

Question 49

What is a deficit a sign of

Answer 49

A country is uncompetitive

Question 50

Why should you avoid large, long term deficit

Answer 50

Causes job losses