Section 1 Measurement Of Macroeconomic Perfomance Flashcards
What is economics
A social science
Studies how economic agents make choices about allocating scarce resources to satisfy infinite needs and wants
What is an economy
An inter-related system of production and consumption activities conducted by economic agents
What is the role of households
Consumption - the demand for goods and services
Also supply their labour in return for wages
What is the main role of firms
Production - converts inputs into outputs - goods & services-
Supply - the goods to households and governments
What is the main role of the government
Set laws
Set taxes
Provide public services
What are the main me objectives
Strong sustained economic growth
Full employment
Satisfactory bop current accounts
Price stability- low stable inflation
What is a macroeconomic indicator
A statistic that tells us something about the macroeconomic performance of an economy
What is the different between a lead and lag indicator
Lag indicators are data about the past, lead indicators and expectations about the future
What is a macroeconomic conflict
When it is not possible to achieve 2 objectives at the same time - happens in the short run
What is a trade- off
The achievement of one objective may be at the expense of another objective
What are index numbers
Allow us to compare relative but not absolute changes, way of simplifying data
Index assesses percentage changes compared with the base value
How to calculate index numbers
Figure in year 2/figure in base year X index number base year
What is the consumer price index
Official measure used to calculate the rate of consumer price inflation
Measures the change in the average cost of living
How is CPI constructed
ONS selects a basket of 750 goods
Updated each year
Weighteted to reflect their importance to consumers
Why is CPI a good measure of inflation?
Same method is used each year by many countries allowing foe meaningful comparisons over time and between countries
Why is CPI not a good measure for inflation
Is the weighting of goods accurate
Is the basket a typical basket
Doesn’t included housing costs so it may understate the real cost of living
What is a nominal value
The actual value- money/ current values
What are real values
Data adjusted for inflation
How do you work out real GDP
Current year nominal GDP/ current year price index X price index in comparison year
What does it mean when real GDP is increasing
The economy is expanding and employment is increasing
How do you calculate unemployment rate
Number of actively seeking/ total labour force X 100
How do you calculate employment rate
Number in employment / population of working age X 100
