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Flashcards in Measuring Economic Performance Deck (22)
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1
Q

define sustainable economic growth

A

growth that can continue over time and does not endanger future generations’ capability to expand productive capacity.

2
Q

define full employment

A

a situation where those wanting and able to work can find employment at the going wage rate.

3
Q

define inflation

A

a rise in the average price level

4
Q

define hyperinflation

A

an inflation rate above 50%

5
Q

calculate nominal GDP

A

GDP figure X base year price index / current year price index

6
Q

define nominal GDP

A

output measured in current prices and so not adjusted for inflation

7
Q

Define unemployment rate

A

the percentage of the labour force who are out of work

8
Q

define labour force survey

A

a measure of unemployment based on a survey using the ILO definition of unemployment.

9
Q

define claimant count

A

a measure of unemployment that includes those receiving unemployment benefits

10
Q

give the two ways of measuring unemployment

A
claimant count (cc)
labour force survey (LFS)
11
Q

difficulties of measuring unemployment

A
  • some people are unemployed but cannot or do not seek benefits and so are not included in the cc.
  • the cc is relatively cheaper and less time consuming than the LFS.
  • some people claiming benefits may not be actively seeking work and cc is therefore inaccurate.
  • cc is not suitable for international comparison as criteria for benefits are different for every economy.
  • sampling difficulties relating to LFS.
12
Q

how to measure inflation (CPI)

A

prices of about 700 goods and services. all items are given weights and are compared to the same month last

13
Q

difficulties of measuring inflation

A
  • doesn’t take improving quality into account
  • doesn’t take into account people’s ability to alter what they buy each year, if a product has gotten much more expensive, people may have stopped buying it.
  • based upon an average house - not everyone is average.
14
Q

causes on economic growth

A
  • increase in aggregate demand
  • a cut in tax or a rise in confidence
  • in the long run, investment
15
Q

causes of unemployment

A

cyclical unemployment - lack of aggregate demand
structural unemployment - decline of industries that previously employed many people.
frictional unemployment - workers are in between jobs

16
Q

causes on inflation

A

demand-pull inflation

cost-posh inflation

17
Q

define demand pull inflation

A

increases in the price level caused by increases in aggregate demand

18
Q

define cost push inflation

A

increases in the price level caused by increases in the cost of production, AS decreases

19
Q

consequences of unemployment

A

lost output
lost tax revenue
government spending on unemployment benefits
pressure on other forms of government spending
costs to the unemployment
hysteresis

20
Q

consequences of inflation

A

fall in the value of money - with prices rising, each pound will buy less
menu costs
shoe leather costs - people moving money to gain the most rewarding rates, time and effort
uncertainty
loss of international competitiveness

21
Q

benefits of inflation

A

low and stable:
rise in prices may encourage firms to produce more
firms may match inflation to wages, making workers feel appreciated.

22
Q

benefits of economic growth

A

rise in material standards of living
reduce in poverty without redistributing income
reducing poverty through reducing unemployment