Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Econ Theme 2 > 2.1 Measuring economic performance LS1, 2, 8 + 9 > Flashcards

2.1 Measuring economic performance LS1, 2, 8 + 9 Flashcards

(53 cards)

Start Studying
1
Q

Index number formula?

A

(raw number in period/raw number in base period) x 100

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Real vs nominal?

A

The nominal value is the actual value whereas the real value has been adjusted for inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Price index formula?

A

100 x (nominal/real)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

GDP expenditure approach?

A

(Gross Domestic Product)
C + I + G + (X-M)
Consumer spending
Investment
Government expenditure
Net exports (X-M)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

GDP definition

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

GNI?

A

Gross National Income
GDP + net overseas income (income sent from foreign countries minus income sent to foreign countries)
Takes into account income from overseas and income sent to overseas
(used by World Bank)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Limitations to GDP?

A

Inequality - doesn’t take into account the distribution of wealth
Hidden economy - doesn’t take into account voluntary/unpaid work
Environment - doesn’t take into account the negative affects a growing economy can have on the environment
Differences in hours worked
Quality of goods/services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

GNI per capita?

A

GNI/population

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

GDP per capita?

A

GDP/population

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Inflation?

A

An increase in the overall level of prices in an economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Deflation vs Disinflation?

A

Deflation: negative inflation
Disinflation: a fall in inflation (but still +ve)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Three key economic categories?

A
  • Economically inactive
  • Employed
  • Unemployed
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Economically inactive?

A

Those of working age but are not in work or looking for work (students, retired, sick, discouraged workers)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Unemployed?

A

Those who are in the workforce but are without jobs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Measures of unemployment?

A
  • Claimant count: the number of people registered as unemployed and claiming unemployment benefit (JSA)
  • ILO unemployment rate: based on the Labour Force Survey
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How does the claimant count measure unemployment rate?

A
  • Measures number of people claiming job seekers allowance (JSA) in the UK
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Who does the claimant count exclude and what does this mean for claimant count figure of unemployment?

A
  • People who are unemployed but have a working partner cant seek JSA
  • People under 18 cant seek JSA
  • People with a certain level of savings cant seek JSA
  • So claimant count figure of unemployment often lower than the labour force survey
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Differences between claimant count and ILO?

A
  • Claimant count starts at 18, ILO starts at 16-17
  • Stigmatism around claimant count of relying on financial support
  • ILO based on quarterly survey of 60,000 households
  • Claimant count often lower than labour force survey
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How does ILO measure unemployment?

A
  • Labour force survey given to random sample of 60,000 UK households
  • To see if they fit their definition of unemployment (ready to work within 2 weeks and have actively looked for work in the last 4 weeks but cannot find a job)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Disadvantages of both ILO and claimant count?

A

Doesnt include:
* Economically inactive
* Voluntarily unemployed
* Hidden economy workers
* Underemployed (working less hours than they wish or jobs that underutilise their skills)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Hyperinflation?

A

Very high rates of inflation as a result of significant increases in the supply of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What can serious hyperinflation result in?

Study These Flashcards
A

A massive disruption of economic activity
* Businesses stop investing in productive activities and invest instead in assets that maintain their value (gold e.g.)
* Firms withhold goods from sale
* Money loses its value

Also political and social unrest

23
Q

Balance of payments account?

Study These Flashcards
A

A record of all financial dealings over a period of time between economic agents of one country and other countries

Split into:
* Current account
* Capital and financial accounts

24
Q

Current account components?

Study These Flashcards
A
  • Trade in goods (or visibles)
  • Trade in services
  • Primary income: money that flows in/out of country as a result of employment or previous investment
  • Secondary income: transfers of money between countries, not for goods/services
25
Current balance?
The difference between the **value of exports and total imports**, added with the **balance of trade** in goods and services, **income** and **current transfers**
26
Current account surplus?
When **exports are greater than imports**, total money flowing into the country is greater than the money flowing out of the country
27
Current account deficit?
When **imports are greater than exports**, total money flowing into the country is less than the money flowing out of the country
28
What is the **inflation rate?**
The change in average price levels in an economy over a given period of time
29
What are the two widely used **measures of the price level?**
* **CPI** (consumer price index) * **RPI** (retail price index)
30
Why does the RPI tend to be higher than CPI?
* **Diff methods** (RPI uses the Carli index to average out different prices) * **CPI excludes a number of items relating to housing** (i.e. mortage interest rate repayments and council tax) * **RPI covers a different sample of the population** than the CPI (RPI excludes top 4% of income earners while CPI covers all households and all incomes)
31
What is the **redistribution effect?**
When certain groups **lose purchasing power and become worse off** while other groups **gain purchasing power and become better off**
32
What groups **lose** from inflation?
* People who receive **fixed income/wages** (pensioners, landlords etc) * People with **incomes or wages that increase at a rate slower** than inflation * Holders of **cash** * **Savers** * **Lenders**
33
What groups **gain** from inflation?
* Borrowers * Payers of fixed incomes or wages * Payers of incomes or wages that increase at a rate slower than the inflation rate
34
How can the inability to predict future inflation lead to lower economic growth?
Can lead to **uncertainty for firms** which can lead to **fewer investments** which can lead to **lower economic growth**
35
What are the **consequences of inflation?**
* **Redistribution**effects * **Uncertainty** * **Menu costs** (incurred by firms when they have to print new menus, catalogues, ads etc due to changes in prices) * **Money illusion** (people feel better off than they are due to nominal income increases, can lead consumers to make wrong spending decisions) * **International (export) competitiveness** when the price level increases in one country than in another, its exports become more expensive to foreign buyers, while imports become cheaper => exports decrease, imports increase => difficulties for country's balance of trade
36
What's the appropriate rate of inflation?
2-3%
37
What are the **causes of inflation?**
* **Demand-pull** inflation * **Cost-push** inflation
38
Explain **demand-pull** inflation
* When AD increases with no increase in AS * Caused by **excess demand** in the economy * Also could be caused by **growth of the money supply**
39
What can cause **excessive increases in AD** in the **UK?**
* **Consumer spending** may rise excessively (low interest rates, high consumer confidence, increasing house prices) * Firms may substantially increase their spending on **investment** * **Government** might be increasing their spending * World demand for **UK exports** could be increasing (boom in global economy)
40
How can **growth in the money supply** cause inflation?
* Banks influence the amount of borrowing and lending in the economy * If **banks increase their lending to customers** * **Money supply will grow** * **Customers likely to spend the money** they have borrowed * Will lead to **increased AD** * Can cause **inflation**
41
Explain **cost-push** inflation
* Changes in the **supply-side** of the economy can also cause inflation * **Cost-push inflation occurs due to rising costs**
42
What can cause **rising costs** in the economy?
* **Wages and salaries** * **Imports** * **Profits** (firms can raise profit by raising prices) * **Government taxes or subsidy removals** | Firms will try to pass on increases in costs onto consumers
43
What are the **5 types of unemployment?**
* **Frictional** unemployment * **Seasonal** unemployment * **Structural** unemployment * **Cyclical/demand deficient** unemployment * **Real wage** unemployment
44
**Frictional** unemployment?
* Short-term unemployment when workers are in between jobs
45
**Seasonal** unemployment?
* When workers work on a seasonal basis and are unemployed when their work is not in season i.e. tourism industry
46
**Structural** unemployment?
* When **demand for labour is less than its supply** in an individual labour market in the economy * i.e. regional unemployment (Northern Ireland) and sectoral unemployment (steel)
47
**Cyclical/demand deficient** unemployment?
* Economies tend to cycle from boom to recession over time * Cyclical/demand deficient unemployment occurs when **economy is not in boom** * Have **insufficient AD** in the economy for all workers (and other factors of production) to be employed
48
**Real wage** unemployment? | aka Classical unemployment
* Employment that exists when real wages are stuck at a level above than needed to reduce unemployment * Employers cant employ workers because cannot afford due to **minimum wage** OR workers not taking low paid jobs because they **earn more in welfare benefits**
49
Why is **cyclical unemployment different** to frictional, seasonal, structural and real wage unemployment?
* Cyclical unemployment caused by a lack of demand in economy * Rest are caused by supply-side factors
50
How can **migration decrease unemployment** in the UK?
* Immigrants to UK **more likely to be employed** than current population (of working age and come to UK to work) * **Spending** of these workers **creates further jobs** in UK
51
How can **migration increase unemployment** in the UK?
* Net inward migration can **depress wage rates** as **supply of labour is increased**, reducing equilibrium price of labour, or wages
51
How has the **process of globalisation** been taking place?
* Proportion of individual economies' **output that is traded internationally is growing** * Increasing ownership of **physical and financial assets** * Individuals are **migrating** in increasing numbers * **Technology is being shared** between countries at a faster rate
52
What are governments 4 major **macroeconomic objectives?**
* **Low unemployment,** achieving full employment * **Low and stable inflation,** avoiding deflation * **Economic growth** in line with similar economies * **Balance of payments equilibrium,** including current account balance

Econ Theme 2 (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions