Measures Of Economic Preference

Question 1

Real GDP and nominal GDP difference

Answer 1

Real GDP Accounts for inflation

Question 2

Gross national income

Answer 2

GDP + overseas investment - what foreigners earn and take home ( used more than GDP )

Question 3

Gross National Product

Answer 3

Value of all goods produced by citizens of a country

Question 4

Purchasing Power Paritites

Answer 4

Compares how much a basket of goods costs in one country against another ( measures cost of living )

Question 5

Issues with using GDP to compare standard of living

Answer 5

Hidden ‘black market’ so GDP underestimated, doesn’t account home grown goods, errors calculating inflation, doesn’t show inequality, doesn’t show where spending is

Question 6

How do the UK measure national wellbeing?

Answer 6

Use a survey (2010) measuring happiness

Question 7

What are the 6 factors measuring UN happiness?

Answer 7

GDP per capita, health, life expectancy, freedom, social connections, corruption

Question 8

Easterlin Paradox

Answer 8

Increase in consumption of goods will increase happiness if basic needs are met but once these are met, an increase in consumption won’t increase long-term happiness

Question 9

Income-happiness correlation

Answer 9

Also linked with social status

Question 10

Deflation

Answer 10

A fall in prices, a slowdown in rate of growth and output

Question 11

Disinflation

Answer 11

A reduction in the rate of inflation

Question 12

RPI/CPI

Answer 12

Retail Price Index/Consumer Price Index - used to compare years, base figures always 100

Question 13

CPI

Answer 13

Basket of goods, work out the value of living costs, goods weighted ( how much is spent on each ) to work importance

Question 14

Limitations of CPI

Answer 14

Not totally representative, doesn’t include the price of housing

Question 15

RPI

Answer 15

CPI + housing costs, excludes to top 4% of earner + low income pensioners, always greater than CPO

Question 16

Issues with CPI and RPI

Answer 16

Sometimes overestimated inflation as don’t account for improved quality of goods

Question 17

Effects of inflation ( to learn )

Answer 17

Debt value falls but consumers owed money lose as money is cheaper value, fiscal drag increased government revenue, less competitive exports, increased inflation

Question 18

Claimant count

Answer 18

Number of people claiming unemployment benefits

Question 19

ILO survey

Answer 19

Everyone 16-70 out of employment for 4 weeks, also measures those underemployed

Question 20

Differences between claimant count and ILO survey

Answer 20

CC includes those fraudulently claiming, ILO includes those who can’t claim benefits, ILO greater than CCP, BOTH don’t include those sick/disabled on gov. training schemes

Question 21

Frictional unemployment

Answer 21

People moving between jobs, not issues as short-term (also new people entering labour market)

Question 22

Structural unemployment

Answer 22

Long-term decline in demand in an industry leading to a reduction in employment

Question 23

Types of structural unemployment

Answer 23

Regional, sectoral, technological

Question 24

Seasonal Unemployment

Answer 24

Industries like tourism only demand labour during certain times of the year

Question 25

Cyclical unemployment

Answer 25

A slowdown in growth ( recession ) causes a drop in demand, reducing need for employment

Question 26

Real wage inflexibility

Answer 26

Real wages above market clearing labour, excess supply of labour ( issues of a minimum wage )

Question 27

Issues of migration

Answer 27

Leads to lower wages as supply of labour increases - worse effect on low skilled jobs

Question 28

Impacts of high unemployment on workers

Answer 28

Loss of income, loss of shifts, lower motivation due to less job security

Question 29

Impacts of high unemployment on firms

Answer 29

Decreased demand so fall in profits, but can offer lowers wages to increase profits

Question 30

Impacts of high unemployment on consumers

Answer 30

Less choice, but products may be put on sale

Question 31

Impacts of high unemployment on government

Answer 31

Fall in tax revenue + higher spending, leads to an increase in the deficit

Question 32

Impacts of high unemployment on society

Answer 32

Higher crime due to social deprivation, regional issues, inefficient on PPF

Question 33

What does the current account measure?

Answer 33

The trade of goods/services + income + current transfers

Question 34

What is the government objective in the BoP?

Answer 34

Have export-led growth

Question 35

Interconnectedness of Economies

Answer 35

Globalisation - due to migration/technology/assets in other countries/international trade ( caused countries to become more interdependent )