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Economics Theme 2 > 2.1 Measures of Economic Growth > Flashcards

2.1 Measures of Economic Growth Flashcards

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1
Q

Define GDP

A

The value of total output of an economy

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2
Q

Define economic growth

A

The % change in GDP over a time period

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3
Q

How to calculate nominal economic growth

A

% change in GDP over time (new-old/old)

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4
Q

How to calculate real economic growth

A

%change in GDP over time (nominal) - rate of inflation e.g 20% - 1% inflation = 19%

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5
Q

Name 4 stages in the economic cycle

A

Boom
Recession
Slump
Recovery

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6
Q

What to use in evaluation for ten markers?

A

MOSH

magnitude, other factors, short/longterm, however

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7
Q

How to calculate GDP per capita

A

GDP/population size

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8
Q

4 ways to measure economic performance

A

Economic growth,
Unemployment,
Inflation,
Trade (BoP)

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9
Q

Name 2 things that happen in a recession and a boom

A

Recession: unemployment, homelessness, low interest rate
Boom: wage growth, more construction, tax revenue increases

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10
Q

What causes increase in value of goods?

A

Innovation

e.g country goes from producing cheap plastic toys to smartphones

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11
Q

What causes an increase in volume of goods and services produced?

A

Increase in productivity (e.g going from producing 100 toys to 150 toys)

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12
Q

What is Gross National Income (GNI)?

A

GDP + net income from abroad

net income means outflows and inflows are included

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13
Q

Name 2 advantages of GDP/GNI

A
  • Widely understood
  • Established, lots of available data
  • Can be compared between countries as internationally recognised
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14
Q

What is Purchasing Power Parity?

A

Comparing how much of items can be bought in one country compared to another (i.e comparing the value of currency)

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15
Q

Why is PPP more accurate than GDP to compare living standards of different countries?

A

Takes living standards into account

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16
Q

Name 5 limitations of GDP

A
  • Doesn’t include informal economy (e.g DIY)
  • Doesn’t include non-declared goods (e.g black market drugs)
  • Doesn’t account for distribution of wealth
  • Doesn’t account for environmental impact (bad for welfare)
  • Includes goods produced even if not sold
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17
Q

Define Gross National Happiness

A

A way of measuring development in a country through happiness

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18
Q

What is real GNI at PPP per capita?

A

Gross national income converted internationally, adjusted for inflation, per person

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19
Q

What is the Human Development Index? (HDI)

A

Gives a score based on life expectancy, education, and standard of living, to rank and compare countries

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20
Q

Name 2 advantages and disadvantages of HDI

A

+ Easy to compare
+ Looks at various factors, not just income
- Doesn’t consider distribution of income
- Doesn’t consider political stability/culture

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21
Q

How to calculate revenue

A

Sales x price

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22
Q

Define inflation

A

Rate of increase in the general price level in an economy (e.g prices higher than last year)

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23
Q

Define deflation

A

The rate of decrease in General price level (prices lower than last year)

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24
Q

Define disinflation

A

A fall in the rate of inflation (e.g this year is 1%, last year was 2%)

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25
Define Consumer Price Index (CPI)
List of goods and services from 20000 shops, measured by price year on year to calculate inflation (change in GPL)
26
What are the index numbers in CPI?
Base year (one which others compared to) - INDEX 100, Weighted index - index no. where relative importance (% spending) is taken into account
27
How do you calculate the final price index of the CPI basket?
Total / no. of products
28
How do you calculate a weighted index? (CPI)
New value / base value x 100
29
How do you calculate the final price index of a weighted index?
total / sum of weights
30
What are 3 limitations of CPI to measure inflation?
- Not fully representative(can't include every good) - Doesn't measure change in inflation because of better quality of output - RPI was used historically, so CPI cannot be compared with older years
31
What is Retail Price Index (RPI)?
A price index that includes mortgage interest payments and council tax, and excludes pensioners and highest earners.
32
What is a disadvantage of RPI?
Not internationally comparable
33
How would you calculate inflation from an index if neither year is a base year?
Calculate percentage change
34
What is demand-pull inflation?
Anything that increased AD can cause inflation
35
What is cost-push inflation?
Anything that decreases AS can cause inflation
36
Name 2 effects of inflation on consumers
- Reduced purchasing power (less spending) | - Uncertainty (may try to stock up on items/save money)
37
Name 2 impacts of inflation on firms
- Less internationally competitive | - Uncertainty makes future planning hard
38
Name an impact of inflation rise on workers
If on fixed income, will be worse off.
39
Name an impact of inflation of governments
Makes them look like they cannot control economy - less public confidence
40
Define 'employed'
People over 16 who did more than 1hr of paid work a week
41
Define unemployed
People over 16 without a job who have actively sought work in the last 4 weeks, and can work within the next two weeks
42
Define inactive
People over 16 not in employment who haven't sought work or wouldn't be able to work in the next two weeks
43
What is the active labour force?
Employed workers + unemployed workers
44
How to calculate unemployment rate
unemployment / active labour force x 100
45
How to calculate employment rate
(employed / population aged 16-66) x 100
46
What is the difference between unemployment level and unemployment rate?
Level - total number | Rate - % in economically active pop
47
Define structural unemployment
Caused by mismatch of skills of workers and skills firms want (decline in industry)
48
Define frictional unemployment
Caused by time it takes to find a new job once one is lost
49
Define seasonal unemployment
When people are unemployed at certain times of year e.g a ski instructor
50
Define voluntary unemployment
When someone chooses not to take a job at the current wage rate (e.g they think it is below their skill level)
51
Define involuntary unemployment
When someone is willing and able to work but cannot find a job
52
Define demand deficient/cyclical unemployment
Unemployment caused by the economic cycle e.g during a recession
53
Define real wage inflexibility unemployment
Unemployment caused by wages not falling to market clearing rate/equilibrium
54
Define youth unemployment
unemployment among people under 24
55
Define underemployment
Working part-time when wanting to work full time OR in a less-skilled profession than you are qualified for
56
Name three benefits in the UK
Universal Credit New Style Job Seeker's Allowance New Style Employment and Support allowance
57
Define Claimant Count
Measures the number of people claiming JSA/unemployment benefits - Must be 18-65 and available and looking for parttime work
58
What is the ILO?
International Labour Organisation : Labour force survey of those 16+ seeking work - International standard for comparison across countries
59
Why may ILO > Claimant count? (3 reasons)
- Some may be looking for work and not claiming benefits - Some may be looking for part time work (not incl. in CC) - ILO is >16 , CC is 18-65
60
Name 2 ways an increase in unemployment affects consumers
- Less disposable income so less spending | - Standards of living decrease
61
Name a way an increase in unemployment affects firms/producers
Less demand as spending down, so less income
62
Name 2 ways an increase in unemployment affects workers
Uncertainty around losing job | Hysterisis: loss of job skills carried on into future
63
Name 3 ways an increase in unemployment affects government
Less tax revenue Higher welfare spending e.g JSA Less public confidence
64
Name 2 ways an increase in unemployment affects society
More crime | Worse mental health
65
How does a reduction in inactive population affect households?
More stress - housework needs to be done, children taken care of etc
66
Name 3 advantages of net inward migration
- Increase in labour force: skills gap filled - Can reduce pressure on public services if migrants employed in NHS etc - Increase in consumer spending
67
Name 3 disadvantages of net inward migration
- Can decrease wages in low-paid jobs - Can 'displace' UK workers - Can put pressure on public services e.g NHS, schools
68
Define Balance of payments
A financial record of all the trade between one country and the rest of the world
69
Are imports a debit (negative) or credit (positive) item in the Balance of Payments?
Debit | - giving money to other countries for items
70
Are exports a debit (negative) or credit (positive)item in the Balance of Payments?
Credit | - other countries pay UK for items
71
What are the sections included in the current account?
1. NET (!) trade in goods 2. NET (!) trade in services 3. Investment income (net current income) 4. Transfer income (net current transefers
72
What makes up the balance of trade
NET trade in goods and net trade in services
73
Name a deficit country and a surplus country (BoP)
Deficit: Uk, USA, France Surplus: China, Germany, Singapore
74
What affect does a current account deficit have on currency?
Makes it weaner internationally | - imports create supply of £, and inc. in supply of £ decreases exchange rate$
75
What effect does a strong pound have on imports and exports?
SPICED imports cheaper exports more expensive
76
What will the current account look like in a boom/recession?
Boom: deficit Recession: balance/surplus
77
What effect does unemployment have on current account balance?
``` full employment (3-4% unemployment) = deficit high unemployment = balance/surplus ```
78
What effect does inflation have on current account balance?
high relative inflation - deficit | cheaper substitutes from abroad so imports increase, price of exports less competitive so less exports
79
How does international trade make countries interdependent, and what effect does this have?
Rely on each other for income, goods and services + Makes countries cooperate - Developing countries cannot compete - If one country is in a crisis, others may be affected
80
Name 5 causes of a current account deficit
1. Exchange rate (strong pound) 2. High inflation rates relative to other countries 3. High wage cost relative to other countries 4. Economic cycle (boom) 5. Difference in quality of goods
81
Name 5 causes of a current account surplus
1. Exchange rate (weak currency) 2. Low rates of inflation compared to other countries 3. Low wage costs relative to other countries 4. Economic cycle (recession) 5. Difference in quality of goods

Economics Theme 2 (6 decks)

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