objectives and circular flow of income

Question 1

how do you measure price stability

Answer 1

most commonly measured in CPI (Consumer Price Index) also known as inflation

Question 2

define economic growth

Answer 2

economic growth is defined as an increase in real GDP. an increase in the real value of goods and services produced in an economy within a given time. “real” because you have to factor in inflation.

Question 3

impacts of low income inequality and poverty. how can it be measured

Answer 3

may lead to social unrest as well as impact standards of living. it can be measured using the Gino Coefficient.

Question 4

what is a fiscal deficit. how solve?

Answer 4

when a government spends more than it receives in tax revenue in a given period of time. therefore governments must borrow money.

Question 5

what is government and household debt called

Answer 5

“public debt” and “consumer household debt”

Question 6

downsides of economic growth

Answer 6

higher economic growth could lead to pressure on resources, therefore prices begin to rise which conflicts the price stability target.

Question 7

define inflation

Answer 7

a persistent increase in the general price level over a given period of time. can be measured in CPI

Question 8

define unemployement

Answer 8

someone who is actively seeking a hob but is currently without a job

Question 9

what is Claimant Count (CC)

Answer 9

CC records the number of people claiming unemployment related benefits. it is one of two ways of measuring unemployment

Question 10

what is international labour organisation (ILO)

Answer 10

defines employment as someone who has been actively seeking work for the past four weeks but are ready and able to start in the next two weeks. it is one of two ways of measuring unemployment (used world wide)

Question 11

what is underemployment

Answer 11

workers who would like but cant get more hours

Question 12

define productivity

Answer 12

output per unit of input per hour

Question 13

define labour productivity

Answer 13

output per worker per hour

Question 14

define international competitiveness and the objective

Answer 14

measuring the value of exports and imports of goods and services

objective is to not have a surplus of one and for it to be balanced. no deficits / excessive surpluses

Question 15

how does the circular flow of income work

Answer 15

household supply their labour to firms and are paid for their work. they then pay firms for the firm’s goods and services. money is recycled around the economy

Question 16

what are the three leakages from the circular flow of income

Answer 16

saving
taxes
imports

Question 17

what are the three injections into the circular flow of income

Answer 17

exports
investments
government spending

Question 18

effects of changes in withdrawal / injection

Answer 18

if injection exceed withdrawals, then the circular flow of income will expand and so national income will rise

if leakages exceed injections, then the circular flow of income will shrink and so national income will fall

Question 19

what is the macroeconomic objective for inflation

Answer 19

ideally low but is dependant on country to ensure price stability

Question 20

what are non core objectives

Answer 20

important objectives but not as important as ….

Question 21

what are the 3 non core objectives

Answer 21

-sound government finances
- sufficient funds
- environmental sustainability
- productivity
- of both workers and machines

Question 22

what does growth show

Answer 22

indication of incomes + living standards
- ideally strong, sustained and sustainable

Question 23

objective for redistribution of income

Answer 23

where wealth should be distributed to benefit everyone so that its fair

however it depends on what governments deem as fair which may be politically motivated