Macro Topic 1 Flashcards
Meaning: economic growth?
This is when a country is producing more goods and services than previously.
This is good as it allows us to consume more foods and services and enjoy a higher standard of living
Meaning: price stability?
This is when there is no inflation (time of generally rising prices)
This is important as it it keeps the value of savings the same and maintains confidence and keeps exports the same price
Meaning: unemployment?
This is when people willing and able to work cannot find a job.
This is bad as it is a waste of resources and we could potentially be producing more goods and services.
Meaning: stable balance of payments on current account?
This is when a country sells as many goods and services abroad as they buy from foreign countries.
X=I
What are the main objectives of government economic policy?
1) balancing the budget (taxation=gov spending)
2) achieving an equitable distribution of income (rich and poor gap not too big)
3) addressing environmental issues (e.g. green taxes, paying for plastic bag, green belts)
4) happiness
Meaning: recession?
Two consecutive quarters of negative growth
Measuring inflation: how is it done?
There are 2 measures: RPI and CPI
Both indices based on changes in prices of a basket of goods (updated annually)
A price survey is carried out which gathers prices from different types of shops and different parts of country
Weights are assigned to goods in basket according to how big proportion of the household’s budget the good or service accounts for
Meaning of the two measures of inflation?
CPI is what gov uses for its target (2% +/- 1%)
- state pension increases and other benefits linked to CPI
- it is internationally comparable measure, calculated by geometric means
RPI is used in pay negotiations
- increases in gain fares and other regulated utilities linked to RPI .
- it includes housing costs e.g. mortgage interest rates and council tax because it’s common in UK to own a house compared to other USA countries
- RPI does not include highest and lowest paid and is calculated by arithmetic means and is usually higher than CPI
Two ways unemployment is measured & descriptions?
1) the claimant count (Jobseekers allowance): this measures the number of people claiming benefits to be unemployment and included people claiming NI contributions and Universal Credit
2) the labour force survey: 60000 people asked whether they are unemployed and looking for a job and this is used throughout EU and tends to be higher figure than claimant count as people being more honest and CC excluded people over pension age who will typically claim pensions over JSA, people looking for part time work, married women, U18s
Labour force also includes some people not eligible for JSA
What is productivity?
This is output per worker per time period
- being more productive makes our goods cheaper
Meaning: balance of payments?
The record of all financial dealings over a prior of time between economic agents of one country and all other countries.
It is split between current account and capital/financial accounts
Difference between current accounts and capital/financial accounts?
Current account is where payments for purchase and sale of goods and services are recorded.
Capital and financial accounts is where flows of money associated with saving, investment, speculation and currency stabilisation are recorded
What does visible mean?
This is trade in goods
What does invisible means?
This is trade in services
What does primary income mean?
This results from the loan of factors of production abroad.
It mainly consists of interest, profit and dividends which are basically factor rewards.
E.g. of primary income is wages repatriated, rent from property owned abroad, dividends on foreign owned shares
