Theme 2: Measures Economic Perfomence Flashcards
What are the types of GDP
-real gdp : adjusted for inflation
-nominal gdp
-total gdp
-gdp per capita
What is purchasing power parity
How much exchange rates need adjusting so that an exchange between countries is equivalent
Limitations of GDP
-negative externalities, opportunity cost
-income inequality, distribution of income
-other quality of life aspects
-informal activity
Difference of CPI and RPI
-CPI
-representative of the average household
-spending patterns different
-RPI
-includes housing costs payments on mortgage interest
Demand pull inflation
Increase in demand increase demand pull inflationary pressure
-closer to full employment more pressure on factors of production
Increase in AD
-depreciation in the exchange rates
-lower interest rates
-high growth export markets
Effects of inflation
-consumers - low and fixed incomes are hardest hit
-firms -low interest rates more borrowing and investing
-the government increase value of state pension
-workers - real income falls with inflation so workers will have less disposable income
-macro economy has micro economic effects
Measures of unemployment
-claimant count - unemployment related benefits
-ILO and the uk labour force survey - part time unemployed
Effects of unemployment
-consumers less disposable income and low standard of living
-firms larger supply of labour to employ from
-workers not fully utilised
-government received less revenue from tax
-negative externalities
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The significance of migration and skill for employment and unemployment
-migrants increase supply of labour
-increase productivity and increase the skill set of the labour market
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Components of the balance of payments
-the current account
-the capital account
-official financing account
What are the goverments macroeconomic objectives
-full employment
-low, stable inflation
-sustainable current account on the balance of payments
-sustainable economic growth
Limitation of gdp per capita
GDP can be distorted because of FDI
GNI
(GDP + net factor income)
Truer reflection of living standards
Not influenced by fdi as income earned by foreign firms is not included
Cost push inflation
Short run Supply side shocks increasing pressure
-increase in cost of production passed onto the consumer through raising prices
-rising supply side costs
-monopolies
-import price increasing
-growth of money supply
-reduces economic growth
Unemployment
Registered as able to work but who cannot find work
