2. Economic Policy Objectives Flashcards
(51 cards)
Factors which cause economic growth
Increase in AD
Improving labour force, productivity up
Improved tech, more productive
More investment
Capital deepening- increase capital to labour ratio
Potential growth
LR expansion of LRAS, potential is what the country could achieve,
Factors affecting AD
High consumer confidence levels
Interest rates
Tax rates
Increased gov spending
Currency changes
Wealth, people feel richer and spend more
Credit availability
Micro finance schemes
Borrowing small amounts from lenders to finance enterprises
Increases income of people that borrow, reduce dependence on primary products
Multiplier
HDI
life expectancy
mean years of schooling - education
GNI per capita
CPI - consumer price index
survey is used
average household
what consumer spend income on, each year it’s updated, goods are weighted
slow to respond to goods, technology is way different, different product all together now
RPI - retail price index
Includes housing costs, more accurate to cost of living
Only in the UK
not good for comparison between countries
causes of inflation
demand pull
cost push
growth of money supply
quantitative easing
cause of deflation
fall in AD
increase in AS, lowers production costs for firms
relative poverty
in uk, below 60% of the median income
absolute poverty
below living subsistence
world bank says less than $1.25 a day
causes of poverty and inequality
inequality in wages and unemployment
welfare payments
taxes
disease, malnutrition and health problems
wars and conflicts
corruption and polictal oppression
natural disasters
inequality in wages
level of education, part time limits how much is earned, discrimination, women taking career breaks, disabilities, can’t get a job
regressive tax
lower income have a higher burden, cigarettes and alcohol affect low income people more
kuznets curve
as an economy moves towards industrial, wages increase faster than the farmers, inequality, wealth is redistributed by education, inequality reduces once nations are developed
consequences of poverty
health, malnutrition, vulnerable to infections
society, crime and mental health issues
education, sometimes have to decide between school or working from a young age
economy, high paying jobs are not accessible, hinders the economy’s ability to improve potential
consequences of inequality
may motivate workers to learn new stills and work hard
monopolies can exploit
inheritance, inequality of wealth can lead to inequality of income, inheritance tax
discourages and demotivates people, social unrest
NAIRU
non accelerating inflation rate of unemployment
macroeconomic objectives
growth
unemployment
inflation
balance trade position
income distribution
ways of measuring unemployment
claimant count method
labour force survey
claimant count
counts the number of people claiming benefits, excludes people who are looking for work
labour force survey
asking 60,000 people whether they were unemployed and whether they were looking for a job
people may lie, sample
costs of unemployment
loss of earnings, lower living standards
more difficultly getting work in future
stress problems of being unemployed
