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Economics > Measuring Economic Performance > Flashcards

Measuring Economic Performance Flashcards

1
Q

What is macroeconomics

A

Economy as a whole

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2
Q

What are the four macroeconomic indicators used to measure economic performance

A

Rate of inflation

Rate of economic growth

State of the balance of payments

Level of unemployment

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3
Q

Define gdp

A

Measure of economic growth

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4
Q

How is economic growth measured

A

Change in output over a period of time

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5
Q

Define national output

A

All goods/services produced by a country

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6
Q

What are the two ways output are measured

A

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

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

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7
Q

What measure out output is national output measured in

A

Value (this is gdp)

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8
Q

What is the rate of economic output

A

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

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9
Q

What are booms

A

Long periods of high economic growth

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10
Q

What is a recession

A

Negative growth for 2 consecutive quarters

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11
Q

What is a slump

A

A long recession

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12
Q

What is an economic depression

A

Sustained economic downturn for a long period of time

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13
Q

What is nominal gdp

A

Gdp that isn’t adjusted for inflation

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14
Q

Define real gdp

A

Gdp that is adjusted for inflation

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15
Q

What does gdp per capita indicate

A

Standard of living

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16
Q

How is gdp per capita calculated

A

Total gdp / population size

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17
Q

Define gni

A

Gross national income

Gdp + net income from abroad

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18
Q

Define gnp

A

Gross national product

Total output of citizens in country

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19
Q

What do index numbers represent

A

Percentage changes

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20
Q

What are index numbers useful for

A

Making comparisons over a large period of time

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21
Q

What is a base year

A

First year (index numbers)

22
Q

What are the two ways you can define inflation

A

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

A fall in the value of money

23
Q

What happens when there is negative inflation / deflation

A

Average price decreases

24
Q

Define hyperinflation

A

Price rises rapidly, money quickly loses value

25
Q

Define disinflation

A

Rate of inflation is slowing down

26
Q

What are the two main measurements used for inflation

A

RPI (retail price index)

CPI (consumer price index)

27
Q

What occurs in the RPI

A

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)

28
Q

What occurs in the CPI

A

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

29
Q

What is the official measure of inflation in the UK

A

CPI

30
Q

What are the limitations of the two main measurements of inflation

A
  • 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
31
Q

What does RPI and CPI help determine

A

State benefits + wages

Used to measure changes in UK international competitiveness

32
Q

What are the two ways of defining unemployment

A

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

33
Q

Define labour force

A

People who are willing and able to work

34
Q

What are the two ways of measuring unemployment

A

Claimant count

Labour force survey

35
Q

Define claimant count

A

Number of people claiming unemployment related benefits from government

36
Q

Advantages of claimant count

A

Easy to obtain (count JSA)

no cost in collecting

Updated monthly, so always current

37
Q

Disadvantages of claimant count

A

Can be manipulated by government to make it seem smaller

Excludes people looking for work but aren’t eligible to claim JSA

38
Q

Define labour force survey

A

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

39
Q

Advantages of labour force survey

A

More accurate than claimant count

Internationally agreed measure, easier to compare with other countries

40
Q

Disadvantages of labour force survey

A

Less upto date than the claimant count

Expensive to collect+put together

Sample may not represent the population as a whole

41
Q

Why do government want to keep track of unemployment

A

High unemployment - bad performing economy

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

42
Q

What is balance of payments

A

International flows of money

43
Q

What does it mean when you pay for imported goods

A

Money flowing out of the country

44
Q

What does it mean when you get payments from export goods

A

Flow of money intro country

45
Q

Define current account

A

Records the international exchange of goods + services

46
Q

What are the four sections to the current account

A

Trade in goods (visible trade)

Trade in services (invisible trade)

International flows of income earned as salaries, interest, profit

Transfers of money

47
Q

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

A

Surplus

48
Q

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

A

Deficit

49
Q

What is a deficit a sign of

A

A country is uncompetitive

50
Q

Why should you avoid large, long term deficit

A

Causes job losses

Economics (38 decks)

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