Theme 2 Flashcards
What is economic growth
Measures the rate GDP of a country changes over a year
Macroeconomic objectives
Reduce unemployment
Ecenomics growth
Control inflation
Promote sustainability
Manage debt
Increase productivity
Improve balance of payments
Redistribute income
Causes of economic growth
More business investment
Better productivity
Improves education and skills
Innovation
Better training of workers
New Technology
Nominal growth and real growth
Nominal: with inflation
Real growth : without inflation
Types of unemployment
Structural = skills not needed anymore
Cyclical = economic reasons
Frictional = personal short term unemployment
Seasonal = parts of the year there’s no work in your job
Causes of unemployment
Declined economic growth
Health
Increasing population
Unemployment consequences
Gov gas to spend more on benefits
Inequality increases
Ways of measuring unemployment
Claimant count =
only in the uk
18-66
Cheap
Easily understandable
Efficient
LFS ( labour force survey)
Europe
16-70
More accurate
Includes people who have found and job and people who have declined benefits
Tools of Fiscal Policy
Decrease/ increase gov spending and Taxation
Fiscal expansionary and Contractionary
Increase AD increase gov spending decrease taxation (expansionary)
Decrease AD decrease gov spending
Increase Taxation (contractionary )
Contractionary (tight ) fiscal
Debt better (less gov spending )
Less ecenomics growth
Increase unemployment
More sustainable
Exports may increase (inflation ) imports decrease
Balanced payments improved
Expansionary (loose )
Stimulate ecenomics growth
Exact opposite
Monetary policy involves
Changes in interest rates
Contractionary moneytary policy
Increased interest rates
Limit amount you can borrow
Less ecenomics growth Increase growth
Increased unemployment
Etc (same as fiscal )
Expansionary (stimulate economic growth )
Opposite
What is Quantitative Easing?
Last resort to stimulate The economy
Disadvantages of Qe
Rising wealth inequality ( increased house prices )
Advantages of QE
Gives bank extra monetary tool
Depreciation of exchange rates (increased exports because of lower prices )
What’s deflation
The rate of inflation becomes negative (general price level falling (below 0 ))
Why is deflation damaging for an economy
People hold back on spending
Debts increase
Fall in confidence
Lower profit margins
Quantitative tightening
Opposite process of QE ( money out of circular flow )
National debt
All defects added up
Trade deficit
Imports greater than exports
What’s a supply side policy?
Set of economic measures and strategies that aim to improve long run productive capacity and efficiency of an exonomy ( more supply )
Main aims of supply side policies
Improve incentive to work
Increase productivity
Increase mobility of labour
Promote innovation
Increase size of workforce
Supple side weaknesses
Productivity gap
Regional economic imbalances
Ageing infrastructure
Low labour mobility
Economic inactivity
Skills shortages
