U2 Macro Definitions Flashcards
Economic growth
increase in real GDP, can be actual and/or potential growth
GDP
The total value of goods and services produced in an economy/total output/total income over a period of time.
GNP
The total value of goods and services produced by domestic producers or capital.
GNI
The total value of goods and services produced by a country over a period of time, plus net overseas interest payments and dividends. (factor income)
GDP per capita
total value of output adjusted for inflation that accounts for its number of people
Real GDP per capita
total value of output adjusted for inflation that accounts for its number of people
Growth of real income
an increase in the total value of output/expenditure/ income adjusted for inflation
Purchasing power parity
PPP measures the total amount of goods and services that a single unit of a country’s currency can buy in another country (2)
* _PPP adjusts for the cost of living in a country (1)
* _PPPs convert the cost of a basket of goods and services into a common currency (1)
* _PPPs eliminate price level differences across countries (1)
* _PPPs equalise the purchasing power of currencies (1)
* _When PPP is high a country’s currency can buy more, often indicating a higher standard of living (1)
* _Used to make a more accurate comparison of GDP/GNI between countries (1)
Recession
two consecutive quarters of negative economic growth
Inflation
a sustained increase in general price level
Deflation
a sustained decrease in general price level
Disinflation
price level increases at a decreasing rate
Aggregate demand
total spending of goods and services of a country. AD=C+I+G+(X-M)
Aggregate supply
total output of a country/ productive potential of a country.
Consumer price index
It uses a weighed basket of goods and service to calculate inflation rate. An annual survey of household spending is used to set the weights/the contents of the basket. The weights are in proportion to the amount of money spent on each item
Underemployment
situation of people at working age with part-time jobs when they would rather work full time, or with jobs that do not make full use of their skills and education.
