Other macroeconomic indicators

Question 1

What are the two main measures for inflation?

Answer 1

• The CPI, CPIH (CPI plus owner occupier housing costs).
• RPI

Question 2

What are the occupier housing costs?

Answer 2

• The amount you would have to pay to rent a property and council tax.

Question 3

How effective is the RPI in comparison to the CPI?

Answer 3

• More inclusive than CPI, includes mortgage interest repayments and Council Tax.
• Tends to be above the CPI.
• Excludes top and bottom 4 percent of the population as they are not representative of the average household.

-Discredited as a measure now because mortgage payments distort the figure - been replaced by CPIH.

-The headline measure of inflation until 2003.

Question 4

How is the CPI calculated?

Answer 4

• The CPI is calculated based on collecting the prices for a basket of goods.
• These goods are then bunched into categories and then weighted based on how often they are bought.

Question 5

What is the Claimant Count?

Answer 5

• The number of people claiming New Style Job Seekers Allowance (if unemployed or work less than 16 hours a week you can claim this).
• It can be claimed as part of Universal Credit or separately.

-It is contribution based on whether you have paid enough National Insurance.

Question 6

What is the Labour Force Survey?

Answer 6

• Quarterly survey of approximately 60,000 households compiled by the Office of National Statistics studying the employment circumstances of the UK Population.

Question 7

What is the Unemployment rate?

Answer 7

• The proportion of the economically active population (those in work plus those seeking and available to work) who are unemployed.

Question 8

What is the Balance of Payments?

Answer 8

• A record of a country’s trade/ transactions with the rest of the world.

Question 9

What factors does the Current Account contain?

Answer 9

• Trade in Goods
• Trade in Services
• Investment Income
• Transfers

Question 10

What factors does the Financial and Capital Account contain?

Answer 10

• Transactions in financial assets
• Investment flows
• Government transactions

Question 11

What is a surplus?

Answer 11

• Sum of exports of goods, services, investment income, and transfers is greater than imports.

Question 12

What is a Deficit?

Answer 12

• Sum of goods services, investment income and transfers is less than imports.

Question 13

Why has the UK traditionally ran a large deficit on the Trade in Goods component of the current account?

Answer 13

• This is true to an increase in demand for consumer goods, many of which have to be imported.
• Decline in the UK manufacturing sector as secondary production is outsourced to low wage economies.
• Low production of primary materials. E.g: gas and oil.