Growth + Employment Flashcards
(25 cards)
Three ways to measure GDP
Expenditure method
Factor Incomes
Value of output
Real GDP definition
Total national output of all goods and services within a given period, adjusted for inflation.
What is GNI
GDP + net property income from overseas
What is PPP
Purchasing Power Parity - how many units of a currency are needed to buy the same basket of goods that can be purchased with a given amount of a different currency.
Economic growth definition
Sustained increase in real GDP over time.
What is the easterlin Paradox
Life satisfaction rises with average incomes but only to a point.
Which country measures gross national happiness to evaluate progress.
Bhutan
What is CPI
Measure of the price level based on the prices of a basket of goods intended to reflect the average consumer.
Retail Price Index
CPI including housing costs
What is cost push inflation
Firms raise their prices in order to respond to rising costs of production by maintaining their profit margins.
What is demand pull inflation
AD grows at a rate which is unsustainable leading to a positive output gap.
What comes under the BoP current account
Trade in goods, trade in services, Investment income and tranfers.
Define the BoP
A record of all transactions between a country and the rest of the world.
Why does the AD curve slope downwards?
Real income effect, balance of trade effect and the interest rate effect.
What is MPC
a change in spending following a change in income.
Methods of measuring unemployment
Labour force survey
Claimants count
Describe the labour force survey
80,000 houses surveyed - employed, unemployed or economically innactive.
Unemployed if over 16, no job, have not sought work in the last four weeks, can work in the next two weeks.
Measured quarterly
Describe Claimants Count Measure
Counts total number of people claiming job seekers allowance or UC.
Data collected monthly
Inexpensive
What is underemployment
People looking for extra hours, overqualified people, looking for an extra job.
What is economic inactivity and what is the current rate.
Working age and NEETS (not in employment, education or training) 22%
What is the youth unemployment rate?
14.2%
Types of disequilibrium unemployment
Cyclical and real wage
Types of equilibrium unemployment
Structural, frictional, seasonal
Stages of the wage price spiral
Amplification (What starts as a cost shock e.g. oil becomes widespread with wage increases.
Entrenchment (Wages expect continuous wage rises making inflation persistent)
Policy Dilemma (Raise interest rates, risk recession, break the wage price spiral)
