Economic Policy Objectives Flashcards
(67 cards)
What is short-run economic growth?
An increase in the total value/output of all goods and services produced in an economy in a given period of time.
What is long-run economic growth?
An increase in the productive potential of an economy
4 ways to show short-run economic growth on a diagram
- change in costs
- an increase in AD
- an increase in AD Keynesian (from curve to vertical area)
- using a PPC (outwards to inwards)
What is the policy objective of economic growth?
Increase standard of living for the population
What is meant by nominal value?
the value of an economic variable based on current prices, taking no account of changing prices through time
What is meant by Real Value?
the value of an economic variable based on current prices, taking account of changing prices through time
How do you calculate a price index?
nominal value/real value x 100
How do you calculate real value?
normal value/price index x 100
What is nominal GDP?
National output measured in terms of prices in the year in question
What is real GDP?
Nominal GDP with the effects of inflation removed
How to calculate real to nominal GDP
nominal gdp/price index x 100
What is GNI
Gross National Income is GDP plus net income from abroad
What is GDP per capita?
The average level of GDP per head of the population
go back to issues with gdp
What is meant by a recession
It occurs when actual growth falls for 2 or more consecutive quarters
Four reasons why GDP and Economic Growth are measured
- indicator of performance to governments
- can be used to assess the population’s standard of living
- can inform government decision - making
- can be compared with other economies
What is economic growth
Economic growth is an increase in real GDP in an economy in a year caused by an increase in AD or an increase in LRAS
What are the five macroeconomic objectives
Sustainable economic growth
Low unemployment
Low/ stable inflation
Fair distribution of income
Competitive international trade
What are the five macroeconomic objectives
Sustainable economic growth
Low unemployment
Low/ stable inflation
Fair distribution of income
Competitive international trade
How to calculate real GDP GO BK
1) Calculate nominal GDP
2) Base year price index and current year price index
3) multiply nominal GDP by base year index divided by the current year price index
What is meant by a recession
Occurs when actual growth falls for 2 or more consecutive quarters
Why are GDP and economic growth measured
- can be used to assess quality of life for citizens
- inform gov decision making
- can be compared with other economies
What are the main difficulties of measuring economic growth and GDP
Doesn’t take into account:
Income inequality
Unofficial work
Exchange rate problems -
Quality of goods and services
What is the economic cycle
A phenomenon whereby GDP fluctuates around its underlying trend, following a regular pattern