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Macroeconomics Year 1 > 2.1 Measures Of Economic Performance > Flashcards

2.1 Measures Of Economic Performance Flashcards

1
Q

What are the 4 indicators of macroeconomics?

A

Inflation, unemployment, balance of payments and economic growth

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2
Q

What does economic growth indicate?

A
  • living standards
  • incomes
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3
Q

What is inflation?

A
  • the increase in general price levels
  • fall in the value of money
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4
Q

define unemployment

A

Those who are willing and able to work, but do not have a job

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5
Q

What is the balance of payments?

A

The balance between imports and exports within an economy

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6
Q

What is economic growth measured by?

A

Real GDP (takes into account inflation)

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7
Q

What are the 2 ways to measure unemployment?

A

The Claimant count and ILO

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8
Q

Why is CPI a weighted index?

A

Goods and services that the consumer spends moron are given more importance than those that they spend less on 

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9
Q

How do you calculate CPI?

A
  • officials carry out a family expenditure survey
  • This is where 7000 households attract on what goods and services they consume
  • The goods and services are then weighted based on most consumption
  • inflation is then calculated based on the changes of these prices 
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10
Q

What is RPI and how is it calculated?

A
  • The ONS (office for national statistics) tracks the changes in prices in a variety of different goods and services over the years
  • These prices are then given their weight and the inflation rate is calculated
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11
Q

How are inflation rates calculated by the CPI and RPI? (What are they compared to)

A

Compared to 2005 figures where the index was given to be 100 

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12
Q

What is balance of trade?

A

The money, value of imports and exports 

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13
Q

What are the four macroeconomic objectives?

A

Strong sustained growth, low or full unemployment low and stay with inflation (at 2%), and a balanced balance of payments

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14
Q

What are the two ways to measure inflation?

A

The RPI and CPI

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15
Q

What is the claimant count?

A

The number of people who are currently unemployed and claiming benefits

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16
Q

What is the ILO?

A

A quarterly survey of households where respondents answer questions about their labour status 

17
Q

Which form of measuring unemployment is preferred, and why?

A

The ILO because it also includes those who don’t claim benefits

18
Q

What are three measures of economic growth?

A

GDP, GDP per capita and GNI

19
Q

Define GDP

A

The value of all goods and services produced in an economy in in a year

20
Q

Why is GDP not a preferred way of measuring economic growth?

A

It doesn’t include informal jobs, so it’s not a accurate representative of economic growth 

21
Q

What is GDP per capita?

A

GDP divided by the population

22
Q

What is GNI per capita?

A

GDP add net factor income

23
Q

What is net factor income?

A

Income of domestic workers - income of foreign workers 

24
Q

Describe the boom in an economic cycle.

A
  • actual growth is higher than trend growth (positive output gap)
  • low unemployment, leads to and increase in consumption (more disposable income)
  • increased tax revenues
  • can lead to demand pull inflation
25
Q

What is demand pull inflation?

A

Demand is higher than supply, so we suffer from supply constraints

26
Q

What is supply push inflation?

A

Increase in costs for factors of production

27
Q

What is recession like in the economic cycle?

A
  • increasing unemployment
  • economic growth is slowing down
28
Q

What is the trough like in the economic cycle?

A
  • high unemployment, decreased confidence
  • AD falls, leading to falling prices
  • falling house prices
  • decreased consumption
29
Q

What is the recovery like in the economic cycle?

A
  • house prices are rising
  • confidence is increasing
  • increase in investment
30
Q

Define recession

A

2 consecutive quarters of negative growth

31
Q

When injections > leakages there is…

A

Rising economic growth

32
Q

When injections < leakages there is…

A

Falling economic growth

33
Q

When injections = leakages there is…

A

Macroeconomic equilibrium

34
Q

What is the multiplier effect?

A

The idea that any change in components of AD will have a much larger effect on economic growth than just the original impact

35
Q

What is the equation for the multiplier?

A

1/1-MPC = 1/MPS

36
Q

What is the accelerator theory?

A

That investment can lead to a direct impact on economic growth

Macroeconomics Year 1 (3 decks)

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