The Measurment If Macroeconomic Performance

Question 1

Measures of economic growth

Answer 1

Real GDP- is the value of VDP adjusted for inflation
Gdp is the quantity of goods and services produced in an economy ( national output)
- rise in economic growth= rise in GDP

Why use it
- allows you to see if they are meeting their objective of economic growth
- also to forecast expected demand and I go forward and also growth

Benefits
- gives a measure of growth
Measure of living standards in a economy as it measures income

Hey issues with GDP
Informal activity - black market activity = Business that operating are not registered= not included GDP figure as it’s not been registered = GDP lower than it should be= a problem for measure of economic growth

Negative externalities of production are not going to be included in our GDP figure such as cost of air pollution, cost of resource repletion= if they were = living standard will be lower than what GDP suggested

Doesn’t tell us anything about the average level of individual income in the economy such as if GDP goes up by 3%, but population increasing by 5 % a year , then individually = people going to be worse of
= that’s why GDP per capita may be more useful
Issue ( same as above)
Also other quality of life aspect that would increase living standards they GDP don’t consider such as healthcare, level of education in society, level of freedom

Don’t give any indication of distribution of income- therefor 2 countries with similar gdp per capita may have different distribution which leads to different client standards of living
-so GDP per capita will tend to overestimate the general standard of living if income is unequal

Question 2

Measure of employment

Answer 2

• claimant count - counts the number of people claiming job seeking allowance ( JSA) - they have to prove they are actively seeking work

Problems
Not everyone eligible can sign on due to limited funds
Under 18 and over 60 don’t count
Some have jobs in black economy but continue to claim benefits
- not everyone who is unemployed will claim it- may be due to embarrassment

Labour force survey- quarterly survey of around 60k households compiled by office of national statistics studying the employment circumstances of UK population
- so find number of employed people, unemployed people, also those economically inactive

Disadvantage sampling size- tiny sample size of higher working age population= sampling error
- the is due to limited funds
- unemployment rate - so there may be disparities between gender, age, region, race, ethnicity which is not mentioned

Question 3

Measure of inflation

Answer 3

Consumer price index- measure household purchasing power with family expenditure survey
This finds out what consumers spend their income on
From this a basket of good is created and weight r according the I how much income is spent on each item

RPI includes housing cost such as council tax unlike COI- tends to have a higher value

✅ both measure is based upon the basket of g/s which designed to represent a typical purchase of consumer throughout UK
✅ the office of national statistics compile CPI and RPI

Disadvantage
Cpi Don’t include housing cost such as rent, mortgage = issue as households spend a lot in them. However to overcome it we go to CPIH= household cost In the basket

Basket updates too slow = once a year to update the basket, not good enough if consumption habit are changing faster

Whilst Office of national statistic goes to great lengths to ensure current of its data= in reality each household will experience different rate of inflation

Conclusion- inflation rates that CPI letting, not actually representative of current consumption habits

Question 4

Productivity

Answer 4

Defined as ouptut per worker per period of time
Measure how efficient production is
Productivity increases if more output can be produce with fewer unit of input

Question 5

Balance of payment account

Answer 5

a record of all financial transaction from one country to another

It states how much is spent on imports and what the value of export is

Question 6

What is national income

Answer 6

Is the total value of good and services a country produces. It is the output in one year . It represent lithe income of an economy
Used to measure living of standards as higher the income enjoyed by population= more can be purchased and higher the standard living enjoyed