2.1

Question 1

what is economic growth

Answer 1

rate of change of output

increase in long term productive potential of country- increase in amount of goods and services produced

% change of GDP per annum
ppf

Question 2

what is GDP

Answer 2

gross domestic product, total value of goods and services produced by a country per year

Question 3

difference between total GDP and GDP per capita

Answer 3

total is overall

per capita is total divided by population

Question 4

how can GDP per capita grow

Answer 4

if national output grows faster than population over a time period, so more goods and services to enjoy per person

Question 5

what is the difference between real GDP and nominal GDP

Answer 5

real GDP does not include inflation

while nominal does

Question 6

what is the equation for real GDP

Answer 6

nominal national output divided by average price level

Question 7

what is short run and long run

Answer 7

In the short run, at least one factor of production is fixed; in the long run, all factors are variable

Question 8

what is gross national income

Answer 8

value of goods and services produced in a country plus overseas investments

subtracts what foreigners earn and send back home as remittances

Question 9

what is gross national product

Answer 9

value of all goods and services produced by a domestic business both at home and abroad

Question 10

what is purchasing power parities

Answer 10

a method that allows us to look at the relative value of different currencies

compares how much the typical basket of goods cost in countries

Question 11

problems of using GDP to compare standards of living

Answer 11

inaccuracy of data- black market, inefficient data collection.

inequalities- increase may be due to growth of income for one group of people only

quality of goods and services- living standards may increase more than GDP suggests

comparing different currencies- issues over which unit to use

Question 12

comparisons of rates of growth of countries over time

Answer 12

national income levels per capita

Question 13

uk national wellbeing

Answer 13

asks 4 questions about life satisfaction, anxiety, happiness and worthwhileness.

Question 14

explain real income and happiness

Answer 14

poor and income increases, happy

rich and income increases, not happier

happiness depends on people around you

Question 15

what is inflation

Answer 15

general increase of prices

Question 16

what is deflation and its causes

Answer 16

fall in general price level over time, demand is delayed as consumers think it will fall further. occurs in periods of low growth

Question 17

disinflation

Answer 17

when prices rise more slowly than they have in the past

Question 18

what is the consumer price index

Answer 18

A household expenditure survey to decide what goes in basket of goods and products will have weights attached to them to determine level of inflation based on consumption.

Question 19

limitations of CPI

Answer 19

does not include price of housing

only used since 1996 so difficult to make comparisons with historical data

not totally representative as it is not possible to take into account every single good

Question 20

what is RPI

Answer 20

same as CPI but includes housing costs and exludes top 4% of income earners and low income pensioners

Question 21

how is demand pull a cause of inflation

Answer 21

caused by excessive demand - too much money chasing too few goods

Question 22

what are causes of demand pull inflation

Answer 22

reduced taxation- increase disposable income

lower interest rates- saving less rewarding

general rise in consumer spending

Question 23

how is cost push a cause of inflation

Answer 23

firms respond to rising costs of production by increasing prices/ decrease in aggregate supply

Question 24

causes of cost push inflation

Answer 24

wage increases

higher raw mat cost

higher taxes

natural disaster

Question 25

how does growth of money supply cause inflation

Answer 25

being too much money in the economy. If people have access to money they will want to spend it but if there is no increase in the amount of goods and services supplied, then prices will have to rise.

Question 26

effects of inflation on consumers

Answer 26

if peoples incomes don't rise, they will have less to spend if in debt, easier to pay off as price is cheaper value, vice versa for money owed psychological effects

Question 27

effects of inflation on firms

Answer 27

if inflation is higher, become less competitive so difficult to export deflation lead to a fall in demand as people postpone purchases, leads to a fall in firms profit and business confidence. reluctant to invest difficult to predict inflation, deflation, disinflation so hard to plan changing prices leads to new menus and labelling etc, costly

Question 28

effects of inflation on governments

Answer 28

if governments fail to change taxes in line with inflation, revenue will fall.

Question 29

effects of inflation on workers

Answer 29

workers will demand increase in wages to cover higher costs of living

Question 30

what is the claimant count as a measure of unemployment

Answer 30

number of people recieving benefits for being unemployed

Question 31

definition of employed

Answer 31

1 hour paid work per week or more, temporarily away from work, government supported training scheme, 15 hours unpaid work for family or business

Question 32

unemployed definition

Answer 32

working age without work, able to work and seeking for work in last 4 weeks and able to start in 2 weeks

Question 33

economically inactive definition

Answer 33

working age, not seeking work, as well as people seeking work but can't start e.g health, study

Question 34

what is the labour force survey

Answer 34

sample of people living in households, asks personal circumstances and activity in labour market, to class as employed, unemployed or inactive

Question 35

comparisons between claimant count and labour force survey

Answer 35

some people would only be in claimant count- fraudulent, hidden economy aren't eligible for benefits, so in LFS but not CC, partner is working,

Question 36

what circumstances do both labour force survey and claimant count ignore

Answer 36

working part time but want to work full time on gouvernement training scheme but prefer employment classed as sick or disabled in education because unable top get job

Question 37

what is underemployment

Answer 37

part time or self employed, but prefer full time. those in jobs that don't reflect skill level, are not included in unemployment statistics increases during recessions

Question 38

what happens if increase in inactivity

Answer 38

fall in productive potential, lower gdp and lower tax revenues as less people working

Question 39

what is frictional unemployment

Answer 39

people moving between jobs due to new workers entering or people leaving short term

Question 40

what is structural unemployment and what are the different types

Answer 40

long term decline in industry leading to a reduction in employment sectoral technological regional

Question 41

what is seasonal unemployment

Answer 41

industries may be prominent during certain times of the year so only demand large number of workers at a certain point of time

Question 42

what is cyclical unemployment

Answer 42

due to a general lack of demand for goods in a country, causing business to cut costs and redunt employees

Question 43

what is real wage inflexibility

Answer 43

when real wages remain above market clearing level so some people remain jobless

Question 44

what is the effect of migration on employment and wages

Answer 44

increased jobs, spending creates more jobs lower wages, supply of labour increases, so price equilibrium reduced.

Question 45

how can uk maintain employment levels

Answer 45

increase skills of workforce

Question 46

impacts of unemployment to workers

Answer 46

low job security loss of skills psychological factors lower living standards due to income

Question 47

impacts of unemployment on firms

Answer 47

fall in profit smaller pool of skilled workers offer low wages

Question 48

impacts of unemployment on consumers

Answer 48

less choice and lower quality of goods firms may lower prices to increase demand

Question 49

impacts of unemployment on government

Answer 49

fall in tax revenue higher spending on welfare budget deficit