Unit 9 - The Measurement Of Macroeconomic Performance Flashcards
Policy objectives
A target or goal that policy-makers aim to ‘hit’
Short-run economic growth
Growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy.
Long-run economic growth
An increase in the economy’s potential level of real output, and an outward movement of the economy’s production possibility frontier.
Gross domestic product (GDP)
The sum of all goods and services, or level of output, produced in the economy over a period of time e.g. 1 year.
Real GDP
A measure of all the goods and services produced in an economy, adjusted for price changes or inflation. The adjustment transforms changes in nominal GDP, which is measured in money terms, into a measure that reflects changes in the total output of the economy.
Nominal GDP
GDP measured at the current market prices, without removing the effects of inflation.
Eurozone
The name used for the group of EU countries that have replaced their national currencies with the euro. Before 2019 , 19 of the them 28 EU countries were in the eurozone, though this may change in future years.
Recession
In the UK and many other countries, a recession is defined as 6 months or more of negative economic growth or declining real national output.
full employment
According to beveridge’s definition, full employment means 3% or less of the labour force unemployed. According to the free-market definition, it is the level of employment occurring at the market- clearing real-wage rate, where the number of workers whom employers wish to hire equals the number of workers wanting to work.
Claimant count
The method of measuring unemployment according to those people who are claiming unemployment related benefits ( Jobseeker’s Allowance )
Labour force survey
A quarterly sample survey of households in the uk. Its purpose is to provide information on the Uk labour market. The survey seeks information on respondents’ personal circumstances and their labour market status during a period of 1-4 weeks.
Inflation
A persistent or continuing rise in the average price level.
Deflation
A continuing tendency for the average price level to fall.
Disinflation
When the rate of inflation is falling, but still positive.
Price index
An index number showing the extent to which a price, or a ‘basket’ of prices, has changed over a month, quarter or year, in comparison with the price(s) in a base year
Consumer price index
The official measure used to calculate the the rate of consumer price inflation in the UK. It calculates the average price increases of a basket of 700 different consumers goods and services
Retail price index
A measure formerly used to calculate the rate of consumer price inflation in the UK.
Indexation
The automatic adjustment of items such as pensions and welfare benefits to changes in the price level, through the use of a price index.
Balance of payments
A record of all the currency flows into and out of a country in a particular time period.
Current account
Measures all the currency flows into and out of a country in a particular time period in payment for exports and imports of goods and services, together with primary and secondary income flows ( previously known as ‘income flows and transfers’)
Exports
Domestically produced goods or services sold to residents of other countries.
Imports
Goods or services produced in other countries and sold to residents of this country
Balance of trade
The difference between the money value of a country’s imports and its exports. Balance of trade is the largest component of a country’s balance of payments on current account.
Balance of trade deficit
When the money value of a country’s imports exceeds the money value of its exports.
Balance of trade surplus
When the money value of a country’s exports exceeds the money value of its imports.
Balancing the budget
When government spending equals government revenue ( G = T ).
Budget deficit
Occurs when government spending exceeds government revenue (G>T). This represents a net injection of demand into the circulation of flow of income and hence a budget deficit is a expansionary.
Trade-off between policy objectives
Although it may be impossible to achieve two desirable objectives at the same time, e.g. zero inflation and full employment, policy-makers may be able to choose an acceptable combination lying between the extremes, e.g. 2% inflation and 4% unemployment.
Policy conflicts
Occurs when two policy objectives cannot both be achieved at the same time: the better the performance in achieving one objective, the worse the performance in achieving the other.
Keynesian economists
Followers of the economist John Maynard Keynes, who generally believe that governments should manage the economy, particularly through the use of fiscal policy.
Pro-free-market economists
Opponents of Keynesian economists, who dislike government intervention in the economy and who much prefer the operation of free markets.
Monetary policy
The use by the government and its agent, the Bank of England, of interest rates and other monetary instruments to try to achieve the governments policy objectives.
Fiscal policy
The use by the government of government spending and taxation to try to achieve the governments policy objectives
Balance of payments equilibrium
A situation in which a deficit or surplus on the current account of the balance of payments is exactly matched by capital inflows or outflows in the other parts of the balance of payments.
Macroeconomic indicators
Provides information from recent economic performance for judging the success or failure of a particular type of government policy, e.g. fiscal policy or monetary policy.
Index numbers
A number used in an index, such as the consumer prices index, to enable accurate comparisons over time to be made.
National income
The flow of new output produced by the economy in a particular period, e.g. a year, measured by the flow of factor incomes
National product (national output)
The flow of new output produced by different industries in a particular period, e.g. a year.
National capital stock
The stock of capital goods, e.g. buildings and machinery, in the economy that has accumulated over time and is measured at a point in time.
Human capital
The skills, knowledge and experience possessed by the population.
National wealth
The stock of all goods that exists at a point in time that have value in the economy.
Consumption
Total planned spending by households on consumer goods and services produced within the economy.
Hidden economy ( informal economy, underground economy and black economy)
All of the economic transactions conducted in cash which are not recorded in the national income figures because of tax evasion.
Purchasing power parity (ppp) exchange rates
Rates of currency conversion that equalise the purchasing power of different currencies by eliminating the differences in price levels between countries.
