topic1 : measurement of macroeconomic performance Flashcards
The government has four main macro economic objectives that aim to provide macro stability
economic growth
Minimizing unemployment
Price stability
Stable balance of payments on current account
Additional macro economic objectives for government might have
balanced government budget
Greater income equality
potential conflicts and trade-off between the macro economic objectives
Economic growth, VS inflation
Economic growth VS the current account
Economic growth versus the government budget deficit
Economic growth, VS the environment
Unemployment VS inflation
what does the Phillips curve show?
As economic growth increases, unemployment falls due to more jobs being created however, this causes wages to increase which can need some more consumer spending and an increase in the average price level so there is a trade-off between unemployment and inflation in the short run
The performance of an economy can be measured with the following data
Real GDP
Real GDP per capita
Consumer prices, index and retail prices index CPI/RPI
Measures of unemployment
Measures of productivity
Balance of payments on current account
Real GDP
Real GDP is the value of GDP adjusted for inflation
GDP
The quantity of goods and services produced in an economy
Real GDP per capita
Real GDP divided by the population of the country
Consumer prices index CPI
measures household purchasing power with the family expenditure survey (measure of inflation)
The survey finds out what consumers spend their income on, and a basket of goods is created. The goods are weighted according to how much income is spent on each item. each year the basket is up updated to account for changes in spending patterns.
retail prices index RPI
a measure of inflation, which in turn is the rate at which prices for goods and services are rising.
like CPI but includes housing costs such as payments on mortgage and council tax so often has a higher value ( inflation is higher)
Two main measures of unemployment
-The claimant Court
The international Labour organization on the UK labourforce survey
The claimant court
Council number of people, claiming unemployment related benefits
Productivity
Output per worker her period of time
Balance of payments
Record of all financial transactions made between consumers firms and the government from one country with other countries it states how much is spent on imports and the value of exports is
What are exports?
goods and services sold to foreign countries
Are exports positive or negative in the balance of payments
positive in the balance of payments because they are an inflow of money
What are imports?
Goods and services bought from foreign countries
Are imports positive or negative in the balance of payments
Negative on the balance of payments because they are an outflow of money
The balance of payments is made up of
-the current account
-the capital account
-the official financing account
what is the current account on the balance of payment?
The balance of trade in goods and services
What are index numbers used for?
To make comparisons between years and to measure the magnitude of change over time, a base is used then compared to other years
The calculation used to measure a change in price overtime, e.g. for CPI
(Pn /P0) x 100
(Pn /P0) x 100
what is PN & P0
P0 is the price level in the base year
PN is the price in the year being compared
nominal GDP
GDP without brung adjusted for inflation
Total GDP
combined monetary value of all goods and service’s produced within a country’s border during a specific time period
gross national incomr can be measured by
GNP gross national product
GNI gross national income
GNP
market value of all products produced in an annum by the labor and property supplied by the citizens of one country
GNI
GNI is the total income earned by a country’s residents and businesses, including income from abroad
GDP limitations
-no indication of distribution of income
-may need to be recalculated in terms of purchasing power
- large hidden economies such as black market
- no indication of welfare
Purchasing Power Parity
theory that estimates how much the exchange rate needs adjusting so that an exchange between countiries is equivalent according to each currencys purchasing power
