Macroeconomics, Part 8- Economic Performance Flashcards Preview

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Flashcards in Macroeconomics, Part 8- Economic Performance Deck (52)
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What is WPIDEC?

Weaker pound, imports dearer, exports cheaper


What is SPICED?

Stronger pound, imports cheaper, exports dearer


Quantitative easing?

When the bank of England injects electronically more money into the banking system.


What are two ways the government measures unemployment?

-Claimant count
-Labour force survey


What is the difference between the claimant count and the labour force survey?

The claimant count is the number of people officially claiming unemployment benefits, but the labour force survey in just those actively seeking and available for work whether they are claiming unemployment benefits or not.


What is the international labour organisation (ILO)?

Compares the amount of unemployment in different countries.


What are the main types of unemployment?

-Seasonal (e.g. tourism, agriculture, construction)
-Structural (Immobility of labour)(mismatch of skills and jobs)
-Frictional (people moving between jobs)
-Cyclical (demand deficient unemployment)


Underemployment definition:

When people are counted as looking for an additional job or actively searching for a new job with to replace their current (main) job.
Or, they want to work longer hours in their current job at their basic rate of pay.
Underemployment may be rising even if unemployment is declining.


What are the types of immobility of labour?

-Geographical immobility
-Occupational immobility (a job requires certain skills that someone does not have)


Information deficit definition:

When companies don't know exactly what the equilibrium is so the wage rate might be above the equilibrium.


Why might the equilibrium rise?

-Rise in minimum wage
-Union action


Hysteresis definition:

When a recession is so deep and so prolonged that even when recovery happens, GDP doesn't reach where it would be under other circumstances. It creates a new trade cycle.


Recession definition:

Two consecutive quarters with negative economic growth.


GDP definition:

The value of total output in one year


Nominal economic growth definition:

% increase in GDP from one year to the next


Real economic growth definition:

Nominal economic growth minus inflation.


What are the policies to reduce unemployment?

-Fiscal policy: cut income tax, raise tax allowance
-Monetary policy: cut interest rates


How do fiscal policy and monetary policy reduce unemployment?

-A decrease in income tax or increase in tax allowance
-Increase in disposable income
-Increase in C
-Increase in AD
-Decrease in unemployment (demand for labour...)


Monetary policy definition:

The use of interest rates, money supply and exchange rates to achieve economic objectives. Most governments agree not to use exchange rates.


Supply side policies definition:

Policies designed to increase the supply or improve the quality of our factors of production


How can the government reduce occupational immobility?

Spend money on training to improve or widen skills


How can the government reduce geographical immobility?

Subsidise housing, pay travel costs


How can the government reduce real wage unemployment?

Reduce the minimum wage


What are the three types of inflation?

-Cost push inflation
-Demand inflation
-Printing money


What is cost push inflation?

The cost of businesses rises and these costs are pushed onto consumers by rising prices


Why can the costs of businesses rise?

-The prices of raw materials such as oil rise
-Workers are asking for more money
-Rent is increasing because there aren't enough premises.


What is demand inflation?

Increases in the number of people who want something and the supply can't keep up. This happens because people are becoming richer and have more money to spend. This is why governments can cause inflation by lowering taxes. A decrease in interest rates can also cause long term inflationary pressure.


How can the government lowering taxes cause inflation?

-Decrease in tax
-Increase in disposable income
-Increase in C
-Increase in AD
-Increase in demand inflation


How can a decrease in interest rates cause inflation?

If loans and mortgages fall, people might start taking out loans on things they don't need as much, like cars. Because the demand for these goods increases, firms will start to increase prices.


What is printing money in relation to inflation?

Could be:
-Physically printing money
-Increasing government debt
-Allowing banks to give out larger loans
This means after a while the value of every note starts to fall because demand increase so prices rise