Theme 2.1 Measures of economic performance Flashcards
What is economic growth
The rate of change of output and an increase in the long
How is economic growth measured
the percentage change in real GDP per annum
What is GDP a indicator of?
the standard of living in a country
What is total GDP
The overall GDP for the country
What is GDP per capita
The total GDP divided by the number of people in a country
What are real values
the volume of national income
What are nominal values
the value of the national income
How do you work out nominal GDP
the price x the quantity
What is gross national income (GNI)
The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends
What is gross national product (GNP)
The value of goods and services over a period of time through labour or property supplied by citizens of a country both domestically and overseas
What are the two ways you can make comparisons about growth
over time and between countries
How do you compare growth over time
change in national income level over different years
How do you compare growth between countries
You compare the GDP per capita as different countries have different population sizes
How are exchange rates used to compare counties
Exchange rates are used
What are the problems with GDP
- black market
- home produced services
- errors in calculating
- methods of calculate GDP will change
- take away transfer payments
What is the Easterlin paradox
if you are poor and your income increases your happiness will also increase. However if your income increases when you’re rich won’t necessarily make you happy
What are examples of happiness indexes
- Happy planet index
- Genuine progress indicator
- OECD better life index
- Human development index
What is inflation
The general increase of prices in the economy which erodes the purchasing power of money
What is deflation
The fall of prices and indicated a slowdown in the rate of growth of the output in the economy
What are the two indices
Retail price index and Consumer price index
What is the consumer price index
Collects prices on a list of goods and services. All of these prices are combined.
What are the limitations of CPI
- not totally representative
- It does not include the price of housing
- difficult to make comparisons with historical data
What is RPI
Very similar to CPI but:
- includes housing costs
- only includes to average households
What is demand pull inflation
A shift in the aggregate demand curve will cause either inflation or deflation based on the shift
What is cost push inflation
A shift in the aggregate supply curve will cause prices to rise (right shift) or fall (left shift).
What is the growth of money supply
There is too much money in economy. If people have access to money they will want to spend it however it means prices will rise
What is the effect of inflation on consumers
- if incomes don’t increase with inflation they have less to spend
- psychological effects
- easier to pay off debt
- people owned money get less
- saved money is worth less
What is the effect of inflation on firms
- harder to export
- people want to save their money
- difficult to predict
- have to calculate new prices
What is the effect of inflation on government
- need to change taxes in line with the inflation
What is the effect of inflation on workers
- if their pay doesn’t increase they are worse off
- deflation could cause some staff to lose their jobs
What is the claimant count
the number of people receiving benefits for being unemployed
What is the LFS
a sample of people living in households that are employed, unemployed or inactive
Who are the hidden unemployed
- part time wishing to be full time
- people of government training schemes
- sick or disabled
- those not actively seeking a job but would take one if given
Who are the economically active
the employed and unemployed
Who are the workless
the unemployed and inactive
What is under-employment
those who are in part time or zero hour jobs but would prefer to be full time or those who’s skills are not being put to work
What are the 4 types of unemployment
frictional, structural, seasonal, cyclical
What is frictional unemployment
unemployment due to people moving between jobs
What is structural unemployment
a long term decline in demand in an industry leading to reduction in employment. it is also geographical and occupational mobility
What are the 3 types of structural unemployment
regional unemployment - certain areas suffer from low employment levels
sectoral unemployment - one sector falls in employment
technological unemployment - jobs replaced by tech
What is seasonal unemployment
jobs that are only in demand for certain period of time
What is cyclical unemployment
a general lack of demand of goods and services within the country
What is real wage inflexibility
Unemployment considered to be the result of real wages being above their market clearing level
What does migration do to the economy
increased jobs but decreased wages. They can however fill more skilled jobs that can’t be filled
What is the impacts of unemployment on workers
- loss of income
- stigma of being unemployed
- find it harder to find jobs
- lower job security fear unemployment
What is the impact of unemployment on firms
- decreased demand for goods
- loss of skills and reduced employability of workers
- can offer lower wages
What are the impacts of unemployment on consumers
- less choice
- less available to spend
What are the impacts of unemployment on goverment
- reduced income results in a fall in tax revenues
- increase budget deficit
What are the effects of unemployment on society as a whole
- social deprivation
- loss of potential national ouput
What is the balance of payments
A record of all financial dealings over a period of time between economic agents of one country and all other countries
What is in the components of the balance of payments
Current account and capital and financial account
What is the current account
Record of payments of goods and services. Four parts are:
- Trade in goods
- Trade in services
- Income and current transfers
- Current transfers of government
What is the current account balance equation
Balance of trade + balance of invisibles + net income and current trasfers
What are governments four main objectives
- low unemployment
- low and stable inflation
- economic growth at a similar rate to other economies
- a blance of payment equilibrium
What four key ways have led to globalisation
- The proportion of output of an individual economy which is growing
- people own assets in other countries
- increased migration
- more technology
