U3 T1 1. Key Terms Flashcards
(24 cards)
CPI (and the formula)
An index measuring the change (over a time period) in the prices paid by consumers for a basket of goods.
= C2/C1 * 100
Price Stability
No major fluctuations in prices of general goods outside of the normal range.
Headline Inflation
A general indicator for the increase in prices of items within the basket of goods in an economy
g + s purchased by households
Issues with headline inflation
It can be skewed by outliar products that have abnormally high prices.
Underlying inflation
A more accurate depiction of overall inflation that excludes volatile goods and services/abnormal fluctuations in price changes
Reveals more consistent, long term trend in inflation
Stagflation
When inflation is increasing but the economy isn’t growing - unemployment isn’t reducing.
Inflation and unemployment both high.
Deflation
General decrease in prices within the economy.
Nominal VS Real GDP
Real GDP adjusts for inflation
Because GDP can seem higher when its just the prices within the econmoy that have increased.
Hence real GDP measure volume of output
REAL more accurate.
How is economic growth best defined
An increase in the real GDP over the span of a year
Formula for Real GDP
Nominal GDP * 100/CPI
Cyclical unemployment
Periods of unemployment experienced during fluctuations in the economic cycle
Structural unemployment
Fundamental shifts in the eocnomy (eg. technology advancements) render certain jobs obselete. Happens over a long time period.
Underemployment
Employed but willing to work more hours than you are. Happens to all of the casual/part-time workers.
Frictional unemployment
Short period of unemployment between jobs or when job-searching
Seasonal unemployment
Periods of unemloyment ocurring during the year when labour demand is low for that sector
eg. Mango farmers
Natural unemployment
When unemployment is independent to inflation
All cyclical unemployment is eliminated
Formula for unemployment rate
Unemployed/Labour force (those eligible to work) 100
NAIRU
Non-Accelerating-Inflation-Rate of Unemployment
Lowest level of unemployment achieved before inflation starts rising
Hard-core unemployment
When significant barriers prevent someone from being employable.
Usually severe disabilities, lack of education.
Exists beyond macroeconomic conditions and requires intervention to be helped.
How long before you’re considered long-term unemployed?
12 months. and generally you’re deemed unemployable.. when you start receiving unemployment benefits (maybe not idk)
Voluntary unemployment
Choosing not to work. Usually resigned or looking for better job opportunities.
Nominal GDP
An indicator of the overall value of goods and services within the economy (shown at market value)
Real GDP
Nominal GDP but where the value of the g+s are adjusted for inflation, showing their true value.
More accurate
What does the multiplier effect do
Stimulates the economy by increasing overall expenditure - flow of money around economy
