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Resits > Measuring Economic Performance > Flashcards

Measuring Economic Performance Flashcards

1
Q

4 main macroeconomic indicators:Indicate…

A

Rate of eco growthRate of inflationLevel of unemploymentState of balance of paymentsGov uses to monitor how eco is doing

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2
Q

How is eco growth measured2 ways of measuring?Other ways?

A

GDP Change in national output (all g/s) over period/timeVolume = quant prod in 1 yearValue of all g/s in 1 yr = GDPY = O = E

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3
Q

Eco growth definition

A

Speed at which national output grows over period/time

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4
Q

RecessionDepression

A

Negative eco growth for 2 consecv quartersSustained eco downturn lasting long period/sev yrs

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5
Q

RecessionDepression

A

Negative eco growth for 2 consecv quartersSustained eco downturn lasting long period/sev yrs

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6
Q

Eco growth equation as %change

A

[Change in GDP ÷ Original GDP (£bills)] x 100

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7
Q

Real GDP (2)

A

Effect/% of inflation removedNominal GDP = misleading/GDP seems higher/not adjusted for infl

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8
Q

Measure standard of living equation(2)

A

Total GDP ÷ Pop. size = GDP per capitaGNI per capita = compare living stands between diff countriesGNI = GDP + net income from abroad (income earned by country on investment minus domestic foreigners’ income)

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9
Q

High GDP =High GNI per capita =

A

Strong eco performanceHigh stand of living

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10
Q

Using GDP to make comparisons - what are limitations (4)

A

Hidden economy/black barket - some eco activity wont appear in offc. figsPublic spending - some govs, more benefitsExtent of income inequality - 2 countries, sim. GDP but distribution of inc may be v diffOther = working conds/env. damg/spending needs e.g more inc spent on heating in cold countries to achieve same level of comf of warm places

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11
Q

Using GDP to make comparisons - what are limitations (4)

A

Hidden economy/black barket - some eco activity wont appear in offc. figsPublic spending - some govs, more benefitsExtent of income inequality - 2 countries, sim. GDP but distribution of inc may be v diffOther = working conds/env. damg/spending needs e.g more inc spent on heating in cold countries to achieve same level of comf of warm places

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12
Q

Index numbers represent?Useful?How do they work?

A

%changesUseful for making comps1st yr = base year, 100 + index no. moves up/down from there

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13
Q

Inflation definitionKeeping in mind that … (3)Inflation can be seen as? (-2)

A

Sustained rise in avg price of g/s over period of timeSome g/s prices may rise faster than othersSome prices rise more slowlySome £’s fallingFall in value of money:Fixed amount of money buys less than beforePurchasing power of money fallen

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14
Q

Types of inflation (3)

A

Deflation/neg inflation - prices fallingHyperinflation - prices rise extrm. quickly/money rapidly loses valueDisinflation - rate of inflation slowing down

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15
Q

2 measurements for inflation

A

Retail Price Index (RPI)Consumer Price Index (CPI)

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16
Q

RPI

A

2 surveys:1. Living Costs & Food Survey = finds out what people spend money on + what proportion of income = gives weighting/%2. Prices survey = measures changes in £ of ‘basket of goods’ from 1st survey/700 most commonly used g/s= Price changes multiplied by weightings & converted to index number

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17
Q

RPI (3+1)

A

2 surveys:1. Living Costs & Food Survey = finds out what people spend money on + what proportion of income = gives weighting/%2. Prices survey = measures changes in £ of ‘basket of goods’ from 1st survey/700 most commonly used g/s= Price changes multiplied by weightings & converted to index number

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18
Q

CPI

A

Mortgage interest payms excluded

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19
Q

CPI - differences: (3)Effect

A

Mortgage interest payms & council tax excludedDiff formLarge sample of popLower than RPI

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20
Q

RPI & CPI - Limitations: (4)

A

RPI excludes households in top 4% incomesCPI = covers broader range of pop but doesn’t incl mortgage/council taxLiving Costs survey may be inacc infoBasket of goods only changes 1/yr = might miss some short-term chngs in spending habits

21
Q

RPI & CPI - Gov Policy (-4)

A

Used to help determine wages & state benefits:Employers & trade unions use them a starting pt in wage negtsGov uses to decide on pension increases/other welfare benftsSome benefits = index-linked = rise autmclly by same %

22
Q

RPI & CPI - uses?

A

Gov Policy - determine wages/benefits + measure changes in UK’s int competitiveness

23
Q

RPI & CPI - wages/benefits (-4)

A

Used to help determine wages & state benefits:Employers & trade unions use them a starting pt in wage negtsGov uses to decide on pension increases/other welfare benftsSome benefits = index-linked = rise autmclly by same %

24
Q

RPI & CPI - int competitiveness (2)

A

If CPI rate of inflation is higher than trading countries, then cost more of them = UK, less price competitive = Exports reduce & cheaper Imports (- domestic inflation) increase

25
Q

RPI & CPI - int competitiveness (2)

A

If CPI rate of inflation is higher than trading countries, then cost more of them = UK, less price competitive = Exports reduce & cheaper Imports (- domestic inflation) increase

26
Q

Unemployment definitionRate of unemployment?

A

Those willing/able to work at current wage rate but unable to find workRate = no. of people out of work as % of labour force

27
Q

2 ways of measuring unemployment

A

Claimant CountLabour Force Survey

28
Q

Claimant Count

A

No. of people claiming unemployment-related benefits/JSA

29
Q

Labour Force Survey:

A

ILO International Labour Org uses sample of pop not working & asks if actively seeking work

30
Q

Claimant Count advantages

A

Easy to obtain + no costUpdated monthly = always currentCan be manipulated gov to seem smaller e.g raising school leaving age to 19

31
Q

Claimant Count advantages (2)Disadvantages (2)

A

Easy to obtain + no costUpdated monthly = always currentCan be manipulated gov to seem smaller e.g raising school leaving age to 19 = less ppl can claim JSA so looks like unemployment is fallingExcludes those looking for work but not eligible/choosing not to claim JSA

32
Q

Labour Force Survey advantages (2)Disadvantages (3)

A

More accurate than claimantInternationally agreed measure for unempl = easier to compareExpensive to collect/put togetherLess up to date - way data’s collectedSample may be unrep = inaccurate data

33
Q

Unemployment Impact (4)

A

High rate = eco doing badlyUnemployment = lower incomes/less spending = companies sell less/cut prices/less profitUnused labour in eco = fewer g/s can be producedGov = extra costs - welfare benefits + less tax revenue

34
Q

Balance of Payments

A

International flows of money - money flowing out e.g. tp pay for imports

35
Q

Balance of Payments

A

International flows of money - money flowing out e.g. to pay for imports & money flowing in

36
Q

4 sections to current account

A

Trade in goods/visible trade e.g. cars/foodTrade in services/invisible trade e.g. tourism/insuranceInternational flows of income earned as salaries/interest/profitsTransfers of money from one person/gov to another e.g. foreign aid/fam. member

37
Q

Unbalanced Balance of Payments? (2)Usually?

A

More money flowing out = deficitMore money flowing in = surplusUsually deficit - surplus in invisible but large deficit in visible trade (not bad thing but could be sign that country = uncompetitive) = Gov wants to avoid long-term deficit

38
Q

Measuring Development…

A

Rather than meas. growth/unemployment (dont tell full story), measuring eco development = ✓✓

39
Q

Measuring Development…

A

Working out level of social & human welfare/quality of lifeRather than meas. growth/unemployment (dont tell full story), measuring eco development = ✓✓

40
Q

Measuring Development…Unit?How?

A

Working out level of social & human welfare/quality of lifeHMIRather than meas. growth/unemployment (dont tell full story), measuring eco development = ✓✓Consider more indicators..esp when comp with LEDCs

41
Q

HDI social indicators - 3Advs? (2)

A

Health - life expectancyEducation - avg/expected yrs in schoolStandard of living - real GNI per capitaStandard around worldEasy to collct

42
Q

How is HDI used

A

Measure changes in dev levsCompare levels of dev between countriesAbove

43
Q

How is HDI used (2)Number? (2)

A

Measure changes in dev levsCompare levels of dev between countriesCountries ranked or given as index Above 0.8 = high/below 0.5 = low

44
Q

How is standard of living compared using HNI

A

Comparing GNI per capita = exchange rate might not reflect true worth of 2 currencies

45
Q

How is standard of living compared using HNI (3)

A

Comparing GNI per capita betw diff currencies = exchange rate might not reflect true worth of 2 currencies= Measure GNI per capita using principle of purchasing power parity PPPSo GNI per capita of each county = adjusted to take into account of difference in purch.power = more acc. comparison

46
Q

HDI criticisms

A

Life expectancy doesn’t indicate quality of life e.g long working hours/poor air qualMeasuring avg no of years spent at school = doesnt measure qual of teaching/how well learnt

47
Q

HDI criticisms

A

Life expectancy doesn’t indicate quality of life e.g long working hours/poor air qualMeasuring avg no of years spent at school = doesnt measure qual of teaching/how well learntProbs with GNI per cap = inaccuracies e.g black market makes up larger prop of eco in LEDCsHDI doesnt measure extent of inequality

48
Q

HDI criticisms (4)

A

Life expectancy doesn’t indicate quality of life e.g long working hours/poor air qualMeasuring avg no of years spent at school = doesnt measure qual of teaching/how well learntProbs with GNI per cap = inaccuracies e.g black market makes up larger prop of eco in LEDCsHDI doesnt measure extent of inequality

49
Q

Other ways of measuring development 1. (4)2. (4)3. (3)

A

Agriculture - %adlt m.labour in agricHard work/little payMore dev’d = more machinery= Higher % of pop in agri = low levs of eco devMobile phones per 1000Improve comm & trading = gr. ecodevLarge no. of mobile phones in country = indicates wages high enough for ppl to affordOthers = disease/maln/cl water access

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