objectives and circular flow of income Flashcards
how do you measure price stability
most commonly measured in CPI (Consumer Price Index) also known as inflation
define economic growth
economic growth is defined as an increase in real GDP. an increase in the real value of goods and services produced in an economy within a given time. “real” because you have to factor in inflation.
impacts of low income inequality and poverty. how can it be measured
may lead to social unrest as well as impact standards of living. it can be measured using the Gino Coefficient.
what is a fiscal deficit. how solve?
when a government spends more than it receives in tax revenue in a given period of time. therefore governments must borrow money.
what is government and household debt called
“public debt” and “consumer household debt”
downsides of economic growth
higher economic growth could lead to pressure on resources, therefore prices begin to rise which conflicts the price stability target.
define inflation
a persistent increase in the general price level over a given period of time. can be measured in CPI
define unemployement
someone who is actively seeking a hob but is currently without a job
what is Claimant Count (CC)
CC records the number of people claiming unemployment related benefits. it is one of two ways of measuring unemployment
what is international labour organisation (ILO)
defines employment as someone who has been actively seeking work for the past four weeks but are ready and able to start in the next two weeks. it is one of two ways of measuring unemployment (used world wide)
what is underemployment
workers who would like but cant get more hours
define productivity
output per unit of input per hour
define labour productivity
output per worker per hour
define international competitiveness and the objective
measuring the value of exports and imports of goods and services
objective is to not have a surplus of one and for it to be balanced. no deficits / excessive surpluses
how does the circular flow of income work
household supply their labour to firms and are paid for their work. they then pay firms for the firm’s goods and services. money is recycled around the economy
what are the three leakages from the circular flow of income
saving
taxes
imports
what are the three injections into the circular flow of income
exports
investments
government spending
effects of changes in withdrawal / injection
if injection exceed withdrawals, then the circular flow of income will expand and so national income will rise
if leakages exceed injections, then the circular flow of income will shrink and so national income will fall
what is the macroeconomic objective for inflation
ideally low but is dependant on country to ensure price stability
what are non core objectives
important objectives but not as important as ….
what are the 3 non core objectives
-sound government finances
- sufficient funds
- environmental sustainability
- productivity
- of both workers and machines
what does growth show
indication of incomes + living standards
- ideally strong, sustained and sustainable
objective for redistribution of income
where wealth should be distributed to benefit everyone so that its fair
however it depends on what governments deem as fair which may be politically motivated
