intro to macroeconomics Flashcards
(22 cards)
components of macroeconomics
economic growth, inflation and unemployment
definition of economic growth
the increase in the level of real output (aka Gross Domestic Product) over a period of time
formula of economic growth
(real GDP1 - real GDP2) / real GDP2 x 100%
% changes
positive % change = real GDP has risen
negative % change = real GDP has fallen
GDP values
higher value = more rapid change
lower value = slower change
implications of high economic growth
indicates the economy is growing -> more G&S produced and FOP being employed -> purchasing power increases -> increase in mSOL (govt can also collect more taxes -> increase nmSOL)
definition of inflation
the sustained increase in General Price Level (GPL)
formula of inflation
(new CPI - old CPI) / old CPI x 100%
sign of inflation
positive sign = inflation
negative sign = deflation
inflation values
high value = rapid change
low value = slow change
implications of inflation
govt wants to keep a low + steady inflation rate (1-3%) -> indicates the country is expanding at a sustainable rate
if inflation is too high -> lesser purchasing power -> enjoy lesser G&S -> decrease mSOL
definition of unemployment
the amount of productive resources in a country that is not being utilized to produce output
formula of unemployment
total number of unemployed workers / total size of the labour force x 100%
low unemployment rate
good, desirable -> signifies that country’s resources are fully utilized to produce G&S
high unemployment rate
undesirable -> signifies that a large proportion of the resources are left idle -> mSOL could be higher
types of unemployment
demand-deficient unemployment, frictional unemployment, structural unemployment
demand-deficient unemployment
the economy sucks! -> economy contracts (Q decreases) -> derived demand for labour falls
frictional unemployment
life sucks! -> skills match/ transitioning -> time lag -> unemployed
structural unemployment
you suck! -> skills mismatch -> displacement
sustained economic growth
actual growth + potential growth
actual growth
movement within PPC curve
potential growth
movement of PPC curve (shifting of LRAS curve)
