Macroeconomic Performance

Question 1

macroeconomic objectives

Answer 1

balance of payments
economic growth
minimizing unemployment
equity in distribution of income
low inflation

Question 2

what is economic growth

Answer 2

an increase in national output measured in GDP

Question 3

target rate of growth

Answer 3

2-3%

Question 4

what doe strong economic growth lead to

Answer 4

higher incomes
lower unemployment
better government budgets

Question 5

UK target inflation rate

Answer 5

2%

Question 6

why is it good to have low inflation rate

Answer 6

symptom of economic growth

Question 7

causes of inflation

Answer 7

demand pull
cost push

Question 8

inflation rate trends in 2015-2023

Answer 8

Exceeded 2% target post-pandemic, peaking at ~8% in 2023.
Causes of Inflation:
Cost-Push Inflation, Demand-Pull Inflation: Increased spending after the pandemic.
So response: The Bank of England (BoE) uses monetary policy to regulate inflation.

Question 9

target unemployment rate of UK

Answer 9

4-5%

Question 10

what is balance of payments

Answer 10

is a record of all financial transactions that occur between a country and the rest of the world.

Question 11

gov aim for balance of payments

Answer 11

equilibrium on the current account
exports > imports current account surplus
imports > exports create a current account deficit

Question 12

examples of gov revenue

Answer 12

water, electricity
Taxes: VAT, corporation tax
Sales rev

Question 13

examples of gov expenditure

Answer 13

gov spending
unemployment benefits
spending on public and merit goods

Question 14

what is equitable distribution

Answer 14

ensures fairness and allows the same opportunity for everyone

Question 15

how is income inequality measured

Answer 15

using the gini coefficient

Question 16

what gov interention do the gov do to maintain acceptable levels of income inequality

Answer 16

redistribute income through progressive tax system

Question 17

trade offs between macroeconomic objectives

Answer 17

economic growth and inflation
economic growth and env sustainability
low unemloyment and low inflation

Question 18

how economic growth and inflation conflict

Answer 18

Economic growth moves the economy closer to full employment.
Resource prices are bid up, leading to inflation that may exceed the 2% target rate.

Question 19

how can economic growth and environmental sustainability conflict

Answer 19

EG- negative externalities and depletion of non-renewable resources
higher the growth faster the rate

Question 20

how does low unemployment and low inflation conflict

Answer 20

Fewer workers are available for hire.

Wage inflation occurs, contributing to overall inflation.

Question 21

measure of balance payments

Answer 21

current account

Question 22

measure of unemployment

Answer 22

claiamant account
labour force survey

Question 23

measure of inflation

Answer 23

CPI RPI

Question 24

measure of economic grwth

Answer 24

nominal gdp
real gdp
real gdp per capita

Question 25

difference between real nominal and gdp per capita

Answer 25

nominal- doesnt take into account inflation real - adjusted for inflation real gdp per capita- real gdp divided by total population

Question 26

what is inflation

Answer 26

sustained increase in price over a period of time

Question 27

what is CPI

Answer 27

Measures the average change in prices of a basket of goods and services, excluding housing costs.

Question 28

what is RPI

Answer 28

Measures the average change in prices of a basket of goods and services, including housing costs like mortgage interest payments

Question 29

formula used to calculate CPI

Answer 29

Cost of Basket in Base Year/ Cost of Basket in Current Year ​×100

Question 30

what is the claimant account

Answer 30

the number of people in the UK claiming unemployment-related benefits, like Universal Credit or Jobseeker’s Allowance (JSA) Excludes those who are unemployed but not eligible for benefits

Question 31

what is the labour force surey

Answer 31

a survey with 60000 to self determine whether theyre unemployed used international comparisons

Question 32

what is the current account

Answer 32

It represents the flow of trade (exports - imports) in goods and services and net income payments

Question 33

what is net income

Answer 33

consists of income transfers by citizens who are abroad

Question 34

what is current transfers

Answer 34

payments in gov level between countries eg world bank

Question 35

why is the current account balance expressed as a percentage of gdp

Answer 35

allows for international comparisons

Question 36

what is a trade deficit

Answer 36

countrys imports>exports

Question 37

what is a trade surplus

Answer 37

exports>imports

Question 38

How does export-led growth and rising imports affect the balance of payments?

Answer 38

Helps improve the balance of payments, potentially moving it toward a surplus. As income and wealth increase, demand for imports rises. Consumers enjoy a variety of foreign goods and services. Increased imports can push the balance toward a deficit.

Question 39

what is an index number

Answer 39

tool used by economists to track changes in prices, quantities, or economic activity over time. enables comparison between countries

Question 40

how to calculate CPI

Answer 40

cost of basket in current year/ cost of basket in base year x100

Question 41

what to calculate inflation rate

Answer 41

New CPI - Previous CPI/ Previous CPI x 100

Question 42

how to calculate rpi

Answer 42

same as CPI but may be more accurate because of how sensitive it is to interest rate

Question 43

what is national income

Answer 43

total value of the new output of an economy over a period of time produced by physical and human capital

Question 44

what is used to measure national income

Answer 44

nominal and real GDP

Question 45

fall in national income will indicate?

Answer 45

a recession

Question 46

what is a recession

Answer 46

two or more consecutive quarters of negative economic growth

Question 47

a rise in national income ma indicate what?

Answer 47

economic growth

Question 48

what is gross national income (GNI)

Answer 48

It represents the total income earned by a country's residents, both domestically and abroad

Question 49

how can GNI be calculated

Answer 49

GDP+ (net income abroad) (Wages+interest+rent+profit) + (net income from abroad)

Question 50

adv for national income data to asses changes in living standards

Answer 50

compares changes in living standards over tie evaluates the effectiveness of economic policy international comparisons

Question 51

disadv of GDP data to compare living standards between countries over time

Answer 51

provided as an average so diff. in living standards in the same country can be significantly Quality of goods and services Does not include unpaid or voluntary work Diff. in hours worked Environmental factors

Question 52

why is PPP is better than GDP when making international comparisons

Answer 52

limitations of gdp Currency value differences make it an inaccurate measure for comparing living standards.

Question 53

How does Purchasing Power Parity (PPP) compare living standards between countries?

Answer 53

PPP adjusts GDP by accounting for differences in price levels, allowing a fair comparison of real purchasing power and living standards between countries. Example: Basket of goods: $150 in Vietnam vs. $450 in the USA. PPP = 1:3 (cost of living is higher in the USA). Interpreting GNP per capita with PPP: If USA GNP/capita is more than 3x Vietnam's, the USA likely has a higher standard of living. If USA GNP/capita is less than 3x Vietnam's, Vietnamese citizens may enjoy a higher standard of living, spending less income on the same goods/services.