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A-level economics > Macro 1 and 2 > Flashcards

Macro 1 and 2 Flashcards

1
Q

What is inflation

A

The rate of the increase of prices over time which means over time peoples money becomes less valuable as they can buy less.

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2
Q

How is inflation measured

A

By comparing the costs of good today to the costs of goods a year ago

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2
Q

What is CPI inflation

A

Consumer price index measures a representative basket of goods and services purchased by households e.g. rent, food, clothing

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3
Q

What is RPI inflation

A

Retails price index includes a broader set of expenses including housing costs, mortgage payments, council tax which CPI does not consider.

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4
Q

What is the target inflation rate in the UK

A

2%

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5
Q

What is the current UK inflation rate

A

6.3% for August 2023

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6
Q

What is the effect of high inflation rate on incomes

A

High inflation can lead to the erosion of real wages as the cost of living increases meaning people have to spend more just to survive so they will have less/no disposable income

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7
Q

What is macroeconomics

A

Macroeconomics is interested in many industries operating in or between national economies

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8
Q

What are the three economic agents

A

Households, firms, governments

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9
Q

What is an economic indicator

A

A statistic about economic activity

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10
Q

What is economic growth

A

The expansion of the productive potential of the economy

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11
Q

How is economic growth measured

A

By the GDP - The total production of goods and services in the economy

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12
Q

What does GDP measure

A

The monetary value of goods and services produced in the economy over a period of time.

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13
Q

What is the difference between norminal GDP and real GDP

A

Norminal GDP reflects the raw number in current British pound unadjusted for inflation. However, real GDP adjusts the value for inflation and deflation

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14
Q

What is GDP per capita

A

Per Capita GDP represents the average GDP per person and is calculated by dividing the total by the population.

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15
Q

What is the goverment aim for economic growth in 2022

A

2.5%

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16
Q

What is unemployment

A

The state in which an individual actively seeks employment but is unsuccessful

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17
Q

What is the difference between unemployment level and unemployment rate

A

Unemployment level is the number of people unemployed, however Unemployment rate is the percentage of people unemployed to the number of people employed

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18
Q

How is unemployment level measured

A

Labour force survey

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19
Q

How is unemployment rate measured

A

Number of people unemployed divided by the economically active population (number employed + number unemployed)

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20
Q

What is the difference between claimant count and Labour force survey as measures of unemployment

A

Claimant count is a count of the number of people who claim unemployment related benefits. Whereas, labour force survey is the self-classification of being ‘out of work’ but ‘actively seeking employment’

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21
Q

What are the four broad categories of unemployment

A

Seasonal, structural, cyclical, frictional

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22
Q

What is seasonal unemployment

A

When workers are unemployed at different times of the year

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23
Q

What is structural unemployment

A

Unemployment resulting from industrial reorganisation

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24
Q

What is frictional unemployment

A

Short-term unemployment between jobs

25
Q

What is cyclical unemployment

A

Unemployment caused by fluctuations in the business cycle or economic cycle

26
Q

What does the current account on the balance of payments measure

A

A record of a countries international transactions with different countries

27
Q

What does the government aim to achieve with regards to trade

A

secure free trade agreements with other countries

28
Q

What is the current balance of payments on the current account in the UK

A
  • £21.1 billion
29
Q

How is trade balance calculated

A

Value of a countries exports - Value of countries imports

30
Q

What is labour productivity

A

Value of goods obtained from each employee

31
Q

How is labour productivity measured

A

Output % number of employees

32
Q

How might a firm or economy go about improving productivity

A

Improvement in the factors of production

33
Q

What is the role of households

A

Supply factors of production and purchase goods and services

34
Q

What is the aim of households

A

Maximise Utility - satisfaction

35
Q

What motivates households

A

Price changes

36
Q

What is the role of firms

A

Convert factors of production into goods and services

37
Q

What is the aim of firms

A

Profit

38
Q

What motivates firms

A

Cost changes

39
Q

What is the role of governments

A

Generate revenue to provide an essential economic framework

40
Q

What is the aim of governments

A

Maximise social welfare

41
Q

What motivates the government

A

Votes

42
Q

What is national income

A

The measure of a countries final output of all goods and services produced in a year

43
Q

What is nominal income

A

Measures income at current prices with no adjustment for the effects of inflation

44
Q

What is real income

A

Measures income at constant prices and has been adjusted for the effects of inflation

45
Q

What type of income indicator is more regularly used to measure economic performance

A

Real income is used as it can calculate the rate of economic growth and assist in the measurement of cost of living standards in a country

46
Q

What are Leakages (W)

A

When income leaves the circular flow

47
Q

How can leakages occur

A
  • When households saves (S) some of their income
  • When goods and services are imported (M) from another country
  • When the government imposes taxes (T) on firms and households
48
Q

What are injections (J)

A

When income enters the circular flow

49
Q

How can injections occur

A
  • When the government spend (G) in an economy
  • When goods and services are exported (X) to another country
  • When firms invest (I) to expand their business
50
Q

When does economic growth occur

A

When injections (J) are greater than leakages (W):
J>W

51
Q

When does economic decline occur

A

When injections are less than leakages
J<W

52
Q

When does economic equilibrium occur

A

J=W

53
Q

What are the rewards for the factors of production

A

Land - raw materials
Labour - Wages
Capital - Interest
Enterprise - Profit

54
Q

What is GDP

A

A measure of economic growth

55
Q

What is growth

A

Change in national outputs over time

56
Q

What is national output

A

All the goods and services produced in a country

57
Q

What does GDP equal

A

Consumer spending (C) + Investments (I) + Government spending (G) + ( Exports (X) - Imports (M))

58
Q

What takes up the greatest proportion of GDP

A

Consumer spending (C) - 60% of GDP

59
Q
A

A-level economics (12 decks)

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