The Overall Level of Economic Activity Flashcards
Macroeconomics
Concerned with the national economy and how it allocates resources
Economic growth (economic goal)
A steady rate in the increase of national income
Employment (economic goal)
that result in a low level of unemployment
Price Stability (economic goal)
A low and stable rate of inflation
National debt (economic goal)
A sustainable level of national government debt
GDP
Gross domestic product - the total value of all goods and services produced in en economy in a given time period
GDP measures…
Total value of goods and services produced within a country over a given time period
GNI/GNP measure…
Total value of goods and services produced by a nations citizens over a given time period, regardless of their location
Formula for GNI
GDP + net property income from abroad (- income from foreign firms internationally/+ income generated by national firms internationally)
Nominal figure
Amount of something that was measured in the year that the measurement occurred
Real figure
A nominal figure that has been adjusted for prices to change
Index number
Number that represents the price percentage change
How to calculate real number
(normal/price index) x 100
GDP formula
C+I+G+(X-M)
Real GDP formula
nominal gdp / price index
What is the purpose of collecting national income statistics? (4 reasons)
To see if economic policies are successful, to use as info to develop new policies, to evaluate if standards are living are improving, to use as a base for comparing countries
Limitations of collected national income statistics (5 reasons)
Inaccuracies, unreported or underreported economic activities, externalities (external costs) and composition (whom for and what is prodcued)
Key stages of a business cycle (4)
Recovery, boom, recession, trough
Recession
Two consecutive quarters of negative economic growth
Trough
When the economy stops contracting (decr GDP) before the economy begins to recover
Boom
GDP is at potential maximum
Recovery
GDP is increasing at an accelerating rate
Three other ways to measure economic wellbeing of a nation
Better life index, happiness index, happy planet index
Better life index
Measures wellbeing in areas of material living conditions and quality of life
Happiness index
Measures GDP per capita
Happy planet index
Measures how well countries are doing in achieving long and happy lives
Happy planet index formula
(Wellbeing x life expectancy) / ecological footprint
