Topic 2 - Inflation, Unemployment and Balance Of Payments Flashcards
Inflation
A sustained rise in the average price level in an economy. It means the value of money is falling.
Consumer Price Index (CPI)
A measure of the average level of prices in the UK, the rate of change of which has been used as the governments inflation target since 2004
Retail Price Index (RPI)
An alternative measure to that of the CPI of the average level of prices in the UK. It is known as the “All items” measure of inflation.
Deflation
A sustained fall in the average level of prices I.e. negative inflation. It means the value of money is increasing.
Disinflation
A fall in the rate of inflation
In employment
People who are either working for firms or organisations or self employed.
Economically inactive
Those people of working age who are not looking for work
Discouraged workers
People who have been unable to find employment and who are no longer looking for work
Workforce
People who are economically active - either in employment or unemployed
Unemployed
Of working age who are out of work, want to work, have actively sought work in the last 4 weeks and are available to start work in the next 2 weeks.
Full employment
Where people who are economically active in the workforce and are willing and able to work are able to find employment
Claimant count of unemployment
The number of people claiming job seeker’s allowance each month
ILO unemployment rate
A measure of the percentage of the workforce who are without jobs, but are available for work, willing to work and looking for work.
Underemployment
Where an individual is employed in a second choice occupation or is only able to work part time but would like to work full time.
Calculation for the rate of unemployment
Unemployed
—————— X 100
Workforce
Cyclical unemployment
Unemployment that arises during the downturn of the business cycle, such as a recession.
Demand deficient unemployment
Unemployment that arises because of a deficiency of aggregate demand in the economy, so that the equilibrium level of output is below full employment.
Frictional unemployment
Unemployment associated with job search
Classical unemployment
Unemployment caused by real wages being too high so that workers will want to supply more labour than the business wants to employ.
Seasonal unemployment
Unemployment that arises in seasons of the year when demand is relatively low
Structural unemployment
Caused by changes in the pattern of economic activity within an economy.
Voluntary unemployment
Occurs when an individual chooses not to accept a job at the going wage rate
Involuntary unemployment
Occurs when an individual who would like to accept a job at the going wage rate is unable to find employment
Balance of payments
A set of accounts showing the transactions conducted between one country and the rest of the world.
