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Macro Economics > Chapter 1- Economic Growth And Developmet and balance of payments > Flashcards

Chapter 1- Economic Growth And Developmet and balance of payments Flashcards

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1
Q

What factors influence growth and development

A 
Political and institutional factors 
Educational skills 
Infrastructure 
Tehhnology 
Level of poverty 
Income distribution 
Access to credit and bankruptcy
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2
Q

What is the positive of HDI

A

Able to tell about standard of living through GDP as you are able to see the purchasing power of the people within an economy
See potential productivity of an economy
Able to compare countries internationally
Focuses on more than just expenditure

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3
Q

What are the negatives of HDI

A

Quality of education not considered
GDP doesn’t include income income inequality and informal employment
Doesn’t consider environmental factors
Countries may focus on these factors and forget about other factors

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4
Q

What are the 2 types of economic growth

A

Long run economic growth

Short run economic growth

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5
Q

What is long run economic growth?

A

Increase in productive potential

Movement of PPC

Able to handle growing population

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6
Q

Define short run economic growth

A

Increase in actual GDP

Measured in terms of rate of change of GDP

Moves towards PPC

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7
Q

What is GDP?

A

Total value of output a produced by factors of production over a period of time

Total economic activity by an economy over a period of time

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8
Q

Why is economic growth a macroeconomic policy?

A

Allows improvement in the quality of life, improves national debt,

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9
Q

Who releases the economic stats

A

ONS

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10
Q

What are the negatives of GDP?

A

Unequal wealth distribution

Environmental damage not considered

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11
Q

Define sustainable development

A

Growth reaching current needs and wants without compromising the needs and wants of the future

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12
Q

What percentage of the economy of the service sector account for in the UK?

A

79-80%

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13
Q

What is nominal GDP

A

GDP at current market

Not adjusted for inflation

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14
Q

What is real GDP

A

GDP after being adjusted for inflation

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15
Q

How do you work out real GDP from nominal GDP

A

Real GDP=(Nominal GDP X Base year index)/ current year price index

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16
Q

Why are index numbers used

A

Used as a means to present and analyse data in sophisticated and straightforward manner

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17
Q

How do you measure index numbers?

A

Index numbers in a year X = (Value in year X / Base year value) X 100

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18
Q

Economic growth is measured by

A

Annual percentage change in GDP

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19
Q

What is the percentage change equation

A

(New value- Old value)/ Old value X 100

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20
Q

Define GDP per capita

A

GDP/ population

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21
Q

Why is GDP per capita a better measure of economic growth than real GDP?

A

Takes into account population growth effects
Shows how much person should be earning
Doesn’t take into account money distribution
Doesn’t take into account inequality
Doesn’t take into account hidden market or informal economy

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22
Q

What is the problem of GDP

A

Informal economy and hidden economises more recorded

May not have the technology

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23
Q

Why do developing countries have strong primary sector and cannot move to service lead economy

A

Not enough funds
Lack of skills
No demand for services

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24
Q

Issue with exports of countries mainly being agricultural commodities

A

Competition means low prices so revenue fluctuates and there is a lack of stability

Could lead to exploitations as you don’t have the technology to exploit your own

Natural resources are finite so they will one day run out

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25
What are the MDGs goals
Eradicate extreme poverty and hunger Achieve universal primary education Promote gender equality and promote women Reduce child mortality Improve maternal health Combat HIV/AIDS, malaria and other diseases Ensure environmental sustainability Develop a global partnership for development
26
What 3 areas did MDGs emphasise?
Human capital | Infrastructure and human rights (access to clean water sanitation energy and modern information technology
27
How does political and institutional factors affect growth and development
They can promote through making sure property rights and promoting entrupernership and allow subsidies However others are corrupt
28
How does education affect growth and development?
Education allows more people to gain jobs in tertiary sector improving the quality of life allowing development Raises human capital of a population allowing workers to become more productive
29
How does infrastructure affect growth and development?
Allows movement of goods and services Mean less geographical strains Attracts FDI Workers have less geographic immobility
30
How does technology affect growth and development
Allows development in factors of production leading to increased goods and services leading to higher productivity Also higher quality allowing an increase in price
31
How does the level of income distribution affect
Severe restraint on economic development as it reduces chances of incentives from the bottom meaning less goods and services bought from the bottom meaning firms don’t fully profit
32
How does access to credit and banking affect growth and development
This is because
33
What are the 3 different values of the HDI?
High human development= when HDI is above 0.8 and above Medium Human development- 0.5-0.8 Low human development index- less than 0.5
34
Looks beyond national statistics, wider view of educational opportunities and health as they are also important to the wellbeing of a population
A positive of HDI
35
HDI uses index so numbers so you can compare with other countries
A positive of HDI
36
What are the strengths of HDI?
Looks beyond national statistics, wider view of educational opportunities and health as they are also important to the wellbeing of a population HDI uses index so numbers so you can compare with other countries Looks at outcome rather than expanditure Easy and cheap to collect data
37
Easy and cheap to collect data
A positive of HDI
38
Looks at outcome rather than expanditure
A positive of HDI
39
Doesn’t take into account income inequality
A negative of HDI
40
Only focusing on improving HDI. Reallocation of resources to factors improving HDI has an opportunity cost. Forget about other factors of life like infrastructure
Negative of HDI
41
What are the negatives of HDI
Only focusing on improving HDI. Reallocation of resources to factors improving HDI has an opportunity cost. Forget about other factors of life like infrastructure Doesn’t take into account income inequality Only focuses on 3 aspects of development which is too narrow Doesn’t take into account the quality of education as more years doesn’t equal better quality
42
Only focuses on 3 aspects of development which is too narrow
Negative of HDI
43
Doesn’t take into account the quality of education as more years doesn’t equal better quality
Negative of HDI
44
What is the genuine progress indicator
More comprehensive measure of economic development compared to HDI. 26 indicators in 3 groups
45
What is in the economic group for genuine progress indicator
Inflation unemployment taxing economic growth income inequality national minimum wage interest wage national debt and government spending
46
What is the environmental factors for the genuine progress indicator?
Pollution air water quality noise deforestation reduce biodiversity plus poor air quality manufacturing and natural disasters
47
What are the social factors on the genuine progress indicator?
Quality of education, health care, housing, crime rates, work life balance, relationships, infrastructure, housing costs, corruption.
48
What are the strengths of the genuine progress indicator?
Considers full range of factors that affect welfare | short-term and long-term
49
What are the disadvantages of the genuine progress indicator?
Difficult to count calculate measurement errors can occur
50
Define balance of payments
Set of accounts showing the transaction conducted between a country and the rest of the world
51
What are the functions of balance of payments
1. Keep records of funds show surplus (More money coming in more injections than leakages)Shows deficit (More leakages/more money leaving then coming in) 2. Tells us about the demand and supply of goods. Gives us an idea for the demands of currency because if increasing demand means higher price in their own money
52
Why is this an ever increasing and relevant objective in the
Due to globalisation, Trading at a much larger scale inputs and exports can have a massive impact on unemployment and economy. Economic growth will slow down when they are much more Xbox which means more money leaves in the circular flow of income which lead to unemployment Great to interconnectedness of global economy along for great exchange of goods and services. Greater ownership and establishment of firms in one country by economic factors in another country. Economic growth and unemployment dependent on satisfaction balance of payment
53
What are the four components of balance of payments
The current account, The financial accounts and the capital account
54
What is the current account
Measure of flow of funds from trade in goods and services plus other income flows divided into four parts
55
What are the four parts of current account?
The balance of trade in goods, the balance of trade in service, net investment income/primary income, current transfers/secondary income.
56
What is the balance of trade in goods?
Known as visible trade. Balance of trade in goods represents actual tangible products
57
What is the balance of trade in services?
Known as invisible trade. Represents intangible items examples include banking, finance, insurance, telecommunications, transport and tourism
58
What part of the balance of payments is balance of trade in goods in?
Current account
59
What part of balance of payments is balance of trade in services in?
Current account
60
What part of balance of payments is net investment income in?
Current account
61
What part of balance of payments is current transfers/secondary income in?
Current account
62
What is net investment income/primary income
Movement of shares divided interest profits and migrant remittances
63
What is current transfer/secondary income
Transfers made by the government no goods and services change hands for example to foreign aid
64
What is the financial account?
Measures net change in foreign ownership of the Mestic financial assets
65
What happens if Foreign Ownership of the Mestic financial assets increase more quickly than domestic ownership of foreign financial assets
More money coming into the country then going out so there is a financial accounts are plus
66
What happens if domestic ownership of foreign financial assets increases more quickly then foreign ownership of domestic financial assets
More money going out of the country then coming in so there is a financial account deficit
67
What is the financial account made up of?
Direct investment, portfolio investment, reverse assets.
68
What is direct investment
Long-term assets where the purchases aiming to gain a lasting interest in the company for production purposes
69
What is portfolio investment
Purchases of stocks shares and bonds
70
What is reverse assets
Official reverse of foreign currencies and Gold Held by banks
71
What is the capital account
Small and insignificant. Made of two components doesn’t have a significant effect on the balance
72
What part of the Balance of payments is direct investment in
Financial account
73
What part of the Balance of payments is portfolio investment in
Current account
74
What part of the Balance of payments is reverse assets in?
Current account
75
What is capital transfers?
Measure of net money Movements that most of them come as a result of migrants moving assets from one country to another
76
What part of the. Balance of payments is capital transfers in
Capital account
77
What is transactions in non-produce non-financial assets
Most commonly the source of things such as land in natural resource right and copyright
78
Define GNI per capita
GPD plus net income from abroad expressed as an average per person
79
What is GNI?
GDP does not consider income from abroad. This provides us with an accurate account as to the total amount of output a country produces As this includes all parts of income a country receives.
80
What is the positive of GNI?
Provide an accurate account of the standard of living As higher GNI suggests that there is no more disposable income amongst the population meaning that they can afford more goods and services meaning a higher utility More useful for developing countries as they receive most of the income from abroad Allows comparison
81
What are Negatives of GNI?
Doesn’t account for income inequality, doesn’t talk about the environment,Doesn’t look at informal sector
82
Define human development index?
Composite indicator of development within an economy measured on a scale of 1 to 0

Macro Economics (4 decks)

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