theme 2 pro/cons/factors/definitions Flashcards
Difference between GNI and GDP
GNI is GDP including net overseas payments for example FDI and remittances
What are the other variation of GDP and what do they measure
Real GDP - with inflation
GDP per capita - living standards
Purchasing power parities meaning
An exchange rate from one currency to another, how much a typical basket of good compares to one in another country
Problems of GDP to compare standards of living
- inaccuracy of data due to informal economy (20% of GDP), double counting
- does not look at DIY and paid in cash jobs
- inequalities in GDP
- does not look at quality of goods
- spending on military does not benefit the standard of living
Real incomes and subjective happiness link?
- low income families tend to be happier
- Easterlin paradox means increase in income may not make people happy
- depends on social status
- depends on amount of debt
How is CPI measured
Through Living Costs and Food survey
limits of using CPI
- not totally representative as not updated often
- does not look at housing cost, council tax and pension like RPI
causes of demand pull and cost push inflation
demand pull - change in demand levels
cost push - change in supply levels
employed (k)
someone who does at least 1 hour of work a week
who classifies as under-employed
part time workers
zero hour contracts
gig economy
jobs which do not reflect their skill
MPC formula
change in consumption/change in income
What is positive wealth effect
Wealth is a stock of assets
- as price of assets rise, people feel richer and feel more confident
(k) investment
The addition of capital stock to the economy
Factors influencing investment
- accelerator effect
- animal spirit
- access to credit
- retained profit
- interest rates
factors influencing net trade balance
- real incomes
- exchange rates
- state of the world economy
- degree of protectionism
- non price factors
Factors influencing SRAS
- cost of production
- changes in exchange rates
- changes in tax rates
classical LRAS meaning
Full employment of F.O.P
Factors influencing LRAS
- technological advances
- changes in mrpl
- changes in education
- regulation
- migration
- competition policy
factors influencing AD
consumption
Investment
government spending
net trade
Factors influencing consumption
I.R
wealth effect
confidence
distribution of income
Factors influencing investment
IR
animal spirits
demand of exports
growth
regulation
access to credit
costs
factors of government spending
- trade cycle
- fiscal policy
- budget
- Age distribution of population
factors influencing net trade
- demand for exports
- exchange rates
- real income
- degree of protectionism
- non-price factors
- state of the world economy
why is SRAS upward sloping
firms are only willing to supply more at higher prices
