2.1 Measures of Economic Performance

Question 1

Economic Growth

Answer 1

Measures the rate of change in a country’s output (1). An expansion of the productive potential of an economy (1)

Question 2

Short-run economic growth

Answer 2

The actual annual percentage change in real national output (real GDP)

Question 3

Long-run economic growth

Answer 3

An increase in the potential productive capacity of the economy

Question 4

Gross Domestic Product (GDP)

Answer 4

The value of the quantity of goods and services produced in the economy (1) over a period of time (1)

Question 5

Real GDP

Answer 5

The value of the quantity of goods and services produced in the economy over a period of time (1) adjusted for inflation (1)

Question 6

Nominal GDP

Answer 6

The value of the quantity of goods and services produced in the economy over a period of time (1) not adjusted for inflation (1)

Question 7

GDP per capita

Answer 7

The value of total GDP divided by the population of the country

Question 8

Total national income

Answer 8

The value of all goods and services produced in an economy

Question 9

Per capita income

Answer 9

The total income divided by the population

Question 10

GDP: Volume

Answer 10

Considers the quantity of goods and services produced within an economy

Question 11

GDP: Value

Answer 11

considers the monetary worth of the goods and services produced within an economy

Question 12

Gross National Product (GNP)

Answer 12

The value of all goods and services produced by domestic businesses both at home and abroad this includes overseas assets

Question 13

Gross National Income (GNI)

Answer 13

GDP plus income paid into the country by other countries for things such as interest and dividends

Question 14

Purchasing Power Parities (PPP)

Answer 14

A method that allows us to look at the relative value of different currencies
it takes real GDP and divides it by the number of people within the country
it then converts the income into dollars to allow a comparison between all countries around the world

Question 15

Happiness Economics

Answer 15

A fairly new branch of economics that looks at how content individuals are with their life from a theoretical and scientific viewpoint

Question 16

Inflation

Answer 16

A sustained rise in the general price level within an economy (1) in a given time period (1) (usually a year)

Question 17

Inflation rate

Answer 17

A sustained rise in the general price level within a given time period expressed as a percentage

Question 18

Consumer price index (CPI)

Answer 18

Measures household purchasing power with the family expenditure survey
This is done by the ONS (Office for national statistics)
The survey finds out what consumers spend their income on from this a basket of goods is created (700 items)
The goods in the basket are weighted according to how much income is spent on each item

Question 19

Retail price index (RPI)

Answer 19

Alternative measure of inflation (unlike CPI) RPI included housing costs (payment on mortgage interest and council tax

Question 20

Index numbers

Answer 20

Index numbers are a useful way of expressing economic data time series and comparing/contrasting information

Question 21

Formula for index numbers

Answer 21

Index number in Year Y = (data value in year Y/Base Year Value) x 100

Question 22

Demand-pull inflation

Answer 22

A sustained rise in the general price level caused by excessive (aggregate) demand in an economy for goods and services

Question 23

Cost-push inflation

Answer 23

A sustained rise in the general price level caused by firms responding to rising costs of production by increasing prices of output

Question 24

Money Supply

Answer 24

A measure of the amount of stock of money in the economy

Question 25

M0: Narrow Money

Answer 25

includes notes and coins in circulation

Question 26

M4: broad money

Answer 26

includes M0 (notes and coins) bank deposits and other liquid assets

Question 27

Deflation

Answer 27

A decrease in the general price level within an economy over a given time period

Question 28

Disinflation

Answer 28

When the inflation rate is falling but is still positive e.g. falling from 4% to 2%

Question 29

Shoe leather costs

Answer 29

Due to distorted price signals individuals shop around it is the cost of looking around to fin a cheaper price/best rate of interest

Question 30

Fiscal Drag

Answer 30

Wages rise in line with inflation and an individual is dragged into a higher tax bracket therefore increasing government tax revenue without altering tax brackets

Question 31

Menu Costs

Answer 31

Due to fluctuating prices the firm must print new labels and therefore increases their costs

Question 32

Economically inactive

Answer 32

People of working age who are not seeking work for whatever reason e.g. wealth, discouragement, disability

Question 33

Unemployment

Answer 33

Those who are willing and able to work but are not employed they are actively seeking work and usually looking to start within the next two weeks

Question 34

Unemployment Level

Answer 34

The number of people who are unemployed

Question 35

Unemployment rate

Answer 35

the number of people who are unemployed expressed as a % of the labour force

Question 36

The Claimant Count

Answer 36

This counts the number of people claiming unemployment related benefits such as Job Seeker's allowance (JSA) they have to prove they are actively looking for work

Question 37

Labour Force Survey

Answer 37

Quarterly survey of approximately 60,000 households compiled by the ONS (Office for National Statistics) studying the employment circumstances of the UK population

Question 38

Underemployment

Answer 38

occurs when workers cannot find a job that is suitable for their qualifications and experience or who cannot find enough hours to work

Question 39

structural unemployment

Answer 39

occurs with a long term decline in demand for the goods and services in a particular industry leading to job losses

Question 40

Geographical immobility of labour

Answer 40

Refers to barriers to people moving from one area to another to find work examples include Family, culture ,language barriers and variation in house prices

Question 41

Occupational immobility of labour

Answer 41

workers may have specific skills that are not necessarily needed in growing industries which causes a mismatch between the skill on offer from the unemployed and those required by employers looking for workers

Question 42

Frictional unemployment

Answer 42

Transitional unemployment that occurs as workers move between jobs mainly through career changes or geographical changes

Question 43

Seasonal unemployment

Answer 43

Occurs when workers are unemployed at different times of the year

Question 44

Cyclical (Demand-deficient) unemployment

Answer 44

Caused by a lack of demand for goods and services and it usually occurs during periods of economic decline or recessions (when there is a negative output gap)

Question 45

Real-wage inflexibility (classical) unemployment

Answer 45

occurs when real wage rates are above equilibrium wage rate causing the supply of labour to be greater than the demand for labour

Question 46

Net migration

Answer 46

The difference between emigration (those leaving the UK) and immigration (those entering the UK)

Question 47

Full employment

Answer 47

When the number of job vacancies equal the number of people actively seeking work