Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics Paper 2 > Theme 2: Measure Of Economic Growth > Flashcards

Theme 2: Measure Of Economic Growth Flashcards

1
Q

Economic growth

A

Increase in productive capacity of an economy
Economies ability to produce goods/ services increases
Outwards shift in PPF/ LRAS
% change in real GDP per annum

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

GDP- gross domestic product

A

Total value of goods/ services produced in an economy over a period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Real GDP

A

GDP adjusted for inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

GNI

A

Total value of goods/ services produced by a country over a period of time
Plus the overseas interest payments and dividend

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

PPP- Purchasing Power Parity

A

How much a typical basket of goods in a country cost compared to one in another country.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Pro of PPP

A

Useful to compare countries and takes into account cost of living
Allows to compare living standard

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Limitations of using GDP

A

Inaccuracy of data- not all data included, countries can lie

Quality of goods/ services is not included

Inequalities- some parts of the economy may be growing and others may not

Currencies- cost of living isn’t included

Spending- some spending may increase GDP but not increase standard of living

Qualitative factors- sustainability, quality of life, access of public services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Other ways to calculate growth

A

GNH
Gross national Happiness
Calculates how happy the people are in an economy so their well being

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Easterlin Paradox

A

Increases in consumption of material goods will increase happiness if basic needs aren’t met
But if the needs are met any other increase in consumption won’t increase long term happiness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Causes of economic growth

A

Increase in the quantity and quality of the factors of production
Increase exports- goods and services sold abroad leading to export led growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Impact of economic growth pro

A

Consumption increases
Positive wealth effect
Consumer confidence
Happiness/ quality of life

Investment
Business confidence
More technology

Government revenue
Decrease of the budget deficit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Impact of economic growth CON

A

Increase in poverty/ inequality
Inflation
Risk of structural unemployment

Closure of small to medium enterprises
Producing outdated goods and services

Current vs future spending of government (over spending)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Inflation

A

General and sustained increase of prices in the economy
Decrease the purchasing power of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Deflation

A

The fall of prices
indicates a slowdown in rate of growth of output in the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Disinflation

A

In a reduction in the rate of inflation
Prices are still rising but at a slower rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Inflation target

A

Low and stable at 2%
Range 1-3%
Set by the Bank of England

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How is inflation calculated in CPI

A

5,500 families record spendings over a fortnight in the Living Cost and Food Survey

600-700 items which most spending is recorded and put in the basket of goods

Prices of 710 goods are collected from 20,000 shops in 141 locations and online

Prices are updated every month

Info is collected and put in an average household spending to make an overall index

It takes in the importance of the good so it’s weighted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Limitations of CPI

A

Not fully representative- not representative for non typical household

Spending patterns are different per person and household

Change in quality of goods/ services- price my rise because there is an improvement in the quality of the goods

New products- slow to respond to new products. It changes every year and a few items come in and out of the basket

Doesn’t include housing costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Types of inflation

A

Demand pull
Cost push

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Demand pull causes

A

Excess aggregate demand
Money and credit boom
Economy close to full capacity (inelastic AS)
Positive output gap (AD> potential GDP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Cost push

A

Rising wages
Increase price of raw materials and components cost from domestic and overseas suppliers
Rise in import prices due to fall in exchange rate - increase import cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Rising property prices effect on inflation

A
23
Q

Increasing world oil price

A
24
Q

Depreciating exchange rate

A
25
Q

Rapid expansion of money and credit

A
26
Q

Internal causes of inflation

A

Large surge in property prices
Higher wages/ labour cost
Boom in credit and money supply
Rise in business tax

27
Q

External causes of inflation

A

Increase in world oil/ gas prices
Inflation in global commodity prices
Depreciation in the exchange rate
High inflation in other countries

28
Q

Why is inflation an economic problem

A

Inequality- regressive- takes up a larger % of total income for poorer people

Falling real incomes- if there is a lag in the raise in wages then the wages can buy less

Cost of borrowing- higher interest rates so higher cost of borrowing

Risk of wage inflation- ring labour cost and less profits

Business competitiveness- reduce exports

Business uncertainty- volatile and high inflation will cause less uncertainty as the businesses cannot predict future costs

29
Q

Winners of inflation

A

Workers with strong wage bargaining power

People with debt if interest is lower than inflation- less to pay back

Producers if prices rise faster than costs

30
Q

Losers of inflation

A

Retired on fixed incomes

Lenders and savers if interest rates are negative

Workers in low paid jobs

31
Q

Fiscal policy to control demand pull inflation

A

Contractionary fiscal policy

Increase tax
Decrease government spending/ subsidies

32
Q

Fiscal policy to control cost push inflation

A

Decrease tax
Max price for goods
Subsidies

33
Q

Monetary demand pull inflation

A

Contractionary monetary policy
Increase interest rates
Increase exchange rates
Decrease money supply

34
Q

Monetary cost push inflation

A

Decrease interest rates
Decrease exchange rates
Increase money supply

35
Q

Supply side policies demand pull infaltion

A

Increase LRAS/ PPF
Increase in quality/ quantity of factors of production

36
Q

Unemployment

A

People who are able and willing to work but they cannot find one
They are also actively looking for a job

37
Q

Unemployment measurements

A

Claimant count
International Labour Organisation and UK labour force survey

38
Q

Claimant count

A

The number of people receiving benefits for being unemployed
Provides number of claimants each month and the number of joining and leaving the count each month

39
Q

International labour organisations
Uk labour force survey

A

Those of working age who are without work, able to work and seeking work and have actively looked for work in the last 4 weeks and are available to start in the next 2 weeks

40
Q

Reliable data of claimant count

A

Criteria to meet for benefit
Not all unemployed apply for benefit
Benefit fraud

41
Q

Reliable data
International labour organisation
Uk labour force survey

A

Estimation
Sample size

42
Q

Reliable data for both
Claimant count
International labour organisation
Labour force survey

A

Exclude part time to full time
Those who are not actively seeking employment
Not active

43
Q

Types of unemployment

A

Seasonal
Structural
Frictional
Cyclical

44
Q

Seasonal unemployment

A

Seasonal changes in employment

45
Q

Structural unemployment

A

Unemployment caused by the lack of skills to match jobs

46
Q

Frictional unemployment

A

Unemployment due to people moving between jobs

47
Q

Cyclical unemployment

A

Unemployment caused by changes in AD causing a change in GDP

48
Q

Causes of structural unemployment

A

Decline of manufacturing
Occupational immobility
Geographical immobility
Capital replacing labour
Foreign workers
Long term regional decline
Disincentives

49
Q

Cons of unemployment

A

Lost output, economy in the PPF
Fall in real incomes and lower living standards for those affected
Drop in tax revenue
Higher welfare
Budget deficits
Labour supply decreases as unemployed move overseas

Increase in relative poverty
Increase crime

50
Q

Pros of unemployment

A

Reduce risk of inflation
Lower prices
Labour available for growing business
Self employment

51
Q

Long term effects of unemployment

A

Loss of work experience
Reduced employability
Skill depreciation
Worsening of human capital

Debt as high interest rates
Increase stress

New jobs in recovery
Structural unemployment

52
Q

Why youth unemployment is a problem

A

Skill gaps less chance of being employed
Employees may want experienced workers
Fall in retirement rate caused by less pensions

53
Q

Policies to reduce cyclical unemployment

A

Low I.R causing business lending
Depreciation of E.R allows cheaper and more competitive exports
Reduction in national insurance
Apprenticeship programs
Subsidies
Decrease corporation tax
Tax breaks for research
Subsidise new businesses

54
Q

Policies to reduce structural unemployment

A

Funding for training
Teaching new skills
Apprenticeship
More houses to keep property prices lower and have affordable rent
Higher minimum wage
Decrease income tax
Decrease benefits and increase so no poverty trap

Economics Paper 2 (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions