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Economics Edexcel A A level > Theme 2: Measures of Economic performance > Flashcards

Theme 2: Measures of Economic performance Flashcards

1
Q

Economic growth

A

Rise in the value of GDP (National output)

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2
Q

Real GDP

A

Value of GDP adjusted for inflation.

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3
Q

Nominal GDP

A

Value of GDP without being adjusted for inflation.

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4
Q

Total GDP

A

Combined monetary value of all goods and services produced within a country’s borders during a specific time period

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5
Q

GDP per capita

A

GDP divided by population

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6
Q

Volume of GDP

A

GDP adjusted for inflation. Size of the basket of goods and the real level of GDP.

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7
Q

Value of GDP

A

Monetary value of GDP at prices of the day. Volume times current price level.

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8
Q

Two ways national income can be measured?

A

Gross national product and Gross national income.

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9
Q

Gross national product (GNP)

A

The market value of all products produced in an annum by the labour and property supplied by the citizens of one country.

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10
Q

Gross National Income (GNI)

A

Sum of value added by all producers who reside in a nation, plus net overseas interest payments and dividends.

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11
Q

Purchasing Power Parity

A

The theory that estimates how much the exchange rate needs adjusting so that an exchange between countries is equivalent.

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12
Q

The limitations of GDP to compare living standards.

A

1- Doesn’t give indication of distribution. 2- GDP may need to be recalculated in terms of purchasing power. 3- Doesn’t include hidden markets eg black market. 4- GDP gives no indication of welfare.

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13
Q

According to ONS what 6 factors effect the wellbeing of people in the UK?

A

NAME?

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14
Q

Inflation

A

The sustained rise in the general price level over time.

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15
Q

Deflation

A

Where the average price level in the economy falls. Negative inflation rate

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16
Q

Disinflation

A

a reduction in the rate of inflation

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17
Q

How is inflation calculated?

A

consumer price index

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18
Q

4 key points on CPI

A

1- Survey 2- Weighted basket of goods 3- Measures average price change of the goods 4- updated annually

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19
Q

Limitations of CPI when measuring inflation

A

Only average household. Slow to respond.

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20
Q

Two measures of inflation

A

CPI and RPI

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21
Q

Retail price index

A

Includes housing costs eg mortgage payments. Excludes top 4% of earners and low income pensioners.

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22
Q

Two causes of inflation

A

demand pull inflation and cost push inflation

23
Q

Demand pull inflation

A

Aggregate demand is growing unsustainably.

24
Q

Main triggers of demand pull inflation?

A

1-Depreciation of the exchange rate. 2-Fiscal stimulus eg lower taxes or more government spending. 3- Lower interest rates 4- High growth in UK exports

25
Q

Cost push inflation

A

When prices rise due to an increase in the cost of production.

26
Q

Main triggers of cost push inflation

A

NAME?

27
Q

Hyperinflation

A

A very rapid rise in the price level; an extremely high rate of inflation.

28
Q

Effect of high inflation on consumers

A

NAME?

29
Q

Effect of high inflation on firms

A

NAME?

30
Q

Effect of high inflation on the Government

A

increase the value of the state pension and welfare payments because the cost of living is increasing.

31
Q

Effect of high inflation on workers

A

NAME?

32
Q

How is unemployment measured?

A

Claimant count and labour force survey.

33
Q

Why is the labour force survey more accurate?

A

Takes into account part time unemployment, they are less likely to claim on the claimant count.

34
Q

Unemployment

A

are those able and willing to work, but are not employed. They are actively seeking work and usually looking to start within the next two weeks

35
Q

Underemployment

A

those who have a job, but their labour is not used to its full productive potential. Those who are in part-time work, but are looking for a full-time jobs are underemployed.

36
Q

What are the effects of unemployment on consumers?

A

Less disposable income and their standard of living might fall. Psychological consequences of losing job.

37
Q

What are the effects of unemployment on firms

A

Firms have a larger supply of labour to employ from. Causing wages to fall, which would help firms reduce their costs.

38
Q

What are the effects of unemployment on workers?

A

May lose existing skills if not used and may see a fall in their wages.

39
Q

What are the effects of unemployment on the government?

A

Government might have to spend more on job seekers allowance. Receive less tax revenue.

40
Q

What are the effects of unemployment on society?

A

Workers could have produced goods and services and could have negative externalities such as vandalism if the unemployment rate increases.

41
Q

Types of unemployment

A

Structural, frictional, seasonal, cyclical and real wage inflexibility.

42
Q

structural unemployment

A

This occurs with a long term decline in demand for the goods and services in an industry, which costs jobs.

43
Q

Frictional unemployment

A

This is the time between leaving a job and looking for another job.

44
Q

seasonal unemployment

A

This occurs during certain points in the year, usually around summer and winter.

45
Q

cyclical unemployment

A

This is caused by a lack of demand for goods and services, and it usually occurs during periods of economic decline or recessions.

46
Q

Real wage inflexibility unemployment

A

Wages above the market equilibrium may cause unemployment. Classical economists argue that by letting wages fall to the equilibrium level, there would be no unemployment.

47
Q

Exports

A

goods and services sold to foreign countries, and are positive in the balance of payments. This is because they are an inflow of money.

48
Q

Imports

A

Goods and services bought from foreign countries, and they are negative on the balance of payments. They are an outflow of money.

49
Q

What is the balance of payments made up of?

A

current account, capital and official financial account.

50
Q

The UK has a current account…

A

deficit

51
Q

UK government’s macro economic objectives are to have…

A

Full employment, low and stable inflation, sustainable current account on the balance of payments, and sustainable economic growth.

52
Q

In the UK, during periods of economic decline or recessions, the current account deficit ………. This is because consumer spending falls.

A

falls

53
Q

In theory, the sum of all countries’ trade balances should be…

A

Zero, since what one country exports will be imported by another country.

Economics Edexcel A A level (24 decks)

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