Theme 2 Flashcards
What are 4 factors that cause Economic Growth
- Increased Productivity
- Increased Consumer Spending
- increased government Spending
- increased investments
- increased exports
What are 3 Benefits of Economic Growth
- Greater Living Standards
- Increased Levels Of income
- Better education
- Reduced Poverty
What are 2 Drawback of Economic Growth
- Can lead to higher levels of Inflation
- Inequality
What is Inflation
A rise in prices
What is deflation
A fall in prices
What is Disinflation
A rise in Prices but at a slower rate than before
What is a limitation of using CPI as a measure of inflation
-It can be outdated
What is the difference between CPI and RPI
CPI measure price changes RPI measures the inflation
What is Demand Pull Inflation
This is where increased levels of demand for a product cause the price to rise
What is Cost Push Inflation
Cost of production increases cause firms to increase their prices
What are the 3 causes of inflation
- Demand Pull
- Cosh Push
- Growth of Money
What is the Claimant Count
It measures the number of people that are claiming Job Seekers Allowance
What is the Labour Force Survey
A survey that finds people who are out of work but willing to work
What is Structural Unemployment
Unemployment due to a mismatch of skills in an economy
What is Cyclical Unemployment
Unemployment due to the businsses cycle
What is Frictional Unemployment
People who are unemployed as they are looking for a new job
What is Seasonal Unemployment
People are unemployed due to demand for the labour decreasing
What are 2 benefits of being an Export Led economy
- Economic Growth
- Reduced current account deficit
Define the Current Account
The record of payments for transactions between countries
What can affect the level of Investment
- Spare Capacity
- Business Confidence
- Availability of Credit
- Government Regulations
- Interest Rates
What factors can affect SRAS
- Raw Materials
- Exchange Rates
- Tax Rate
What factors can affect LRAS
- Technological Advances
- Education
- Migration
What is Wealth
The value of assets
What is income
The flow of money
What is the equation for the Multiplier Effect
1 / 1 - MPC
What is a Negative Output Gap
When actual grow is lower than potential growth
What is a Positive Output Gap
When actual growth is higher than potential growth
What are the 4 Characteristics of a Boom
- Low Inflation
- Low Unemployment
- High Consumer Spending
- High Living Standards
What are 4 Characteristics of a Recession
- High Inflation
- High Unemployment
- Low Consumer Spending
- Lower Living Standards
Define Monetary Policy
Manipulation of monetary variables in order to influence AD
Define Fiscal Policy
Manipulation of Government Spending and Taxation in order to influence AD
What is Quantitative Easing
The buying of government bonds by the central bank as a means of increasing money supply to stimulate growth
What is the Base Rate
The rate that the central bank will charge commercial banks for loans
What are 2 Benefits of Demand Side Policies
- Can lead to a Multiplier Effect
- If there is Spare Capacity the economy can grow quickly
What are 2 Drawback of Demand Side Policies
- Multiplier may have a small effect
- If there is no spare capacity supply side policies are needed
- Can create huge budget deficits
What are 2 Benefits of Supply Side Policies
- They can help increase production
- Can help increase growth when spare capacity is limited
What are 2 Drawbacks of Supply Side Policies
- It can be very expensive
- Takes a lot time before seeing the effects
Define Investment
Money spent on purchasing capital goods improve factors of production
Define Exchange Rate
The value of one currency compared to another
