Chapter 7 Economics

Front 1

What is 'human capital'?

Back 1

The stock of knowledge and skills gained through education and experience.

Front 2

What is the difference between Capital Widening and Capital Deepening?

Back 2

Capital Widening maintains the stock of capital per head. While Capital Deepening is an increase in the stock of capital relative to other productive resources.

Front 3

What are the three 'types' of efficiency

Back 3

Allocative efficiency: Minimising waste by directing resources to the usage in which they have the most value.

Technical efficiency: Combining resources more productively so that the same amount of input can produce greater amounts of output.

Dynamic Efficiency: The ability of an Economy to adapt overtime and divert resources currently employed inefficiently to more productive areas

Front 4

Why is GDP not a perfect measure of Economic Growth?

Back 4

1.) GDP doesn't account for cash / second hand transactions

2.) GDP does not account for non-economic factors eg: Pollution

3.) GDP does not account for income distribution

4.) GDP does not account for voluntary or unpaid work

5.) GDP does not account for externalites

Front 5

Define 'Technology'

Back 5

The methods or ideas used in production

Front 6

Define 'Embodied Technological Progress'

Back 6

Progress embodied within the form of a capital good.

Front 7

Define 'Disembodied Technological Progress'

Back 7

Progress within new procedures and techniques

Front 8

What is Economic Growth?

Back 8

The increased capacity of a Economy to satisfy a greater quantity of it's consumers wants and needs over a given period of time.

Front 9

What is GDP

Back 9

GDP (Gross Domestic Product) is the total value of all goods and services produced or consumed within an economy over a given period of time, (usually a year).

Front 10

What is GDP per Capita?

Back 10

GDP per Capita is Real GDP factoring in population growth, and measures the volume and quality of goods and services produced per person.

Front 11

What is Nominal GDP?

Back 11

GDP that has not been adjusted for inflation

Front 12

What is Real GDP?

Back 12

GDP that has been adjusted for Inflation

Front 13

What is Dynamic Efficiency?

Back 13

The ability of an Economy to adapt overtime and divert resources currently employed inefficiently to more productive areas

Front 14

What is Technical Efficiency?

Back 14

Combining resources more productively so that the same amount of input can produce greater amounts of output.

Front 15

What is Allocative Efficiency?

Back 15

Minimising waste by directing resources to the usage in which they have the most value.

Front 16

What are the three ways of measuring GDP?

Back 16

1.) The Income Received Method

2.) The Total Expenditure Method

3.) The Value Added Method

Front 17

What is the Income Received Method?

Back 17

Because people receive an income for the resources they contribute to production the value of production can be measured in terms of Incomes Received.

Front 18

What is the total expenditure method?

Back 18

The money people are prepared to spend can be measure through Market Transactions.

Front 19

What is the Value Added Method?

Back 19

At each stage of production a good can either be sold as a finished good or used as a input. Under this method economists total the value added at each stage of production

Front 20

What is the 'business cycle?'

Back 20

A continuous, cyclical fluctuation of the economy though four distinct phases over time. These being: Boom, Downswing, Trough, and Upswing.

Front 21

What is a 'boom?'

Back 21

A boom is a period when the rate of economic growth and general level of economic activity is above average.

Front 22

What are the characteristics of a 'boom?'

Back 22

1.) High levels of consumption expenditure

2.) A general feeling of confidence throughout the economy.

3.) Cyclical unemployment is relatively low

4.) Inflationary pressure is more likely

Front 23

What is a 'trough?'

Back 23

A trough is a period in which the level of aggregate expenditure is below the economies potential.

Front 24

What are the characteristics of a 'trough'?

Back 24

1.) Higher levels of cyclical unemployment

2.) Lower levels of private profits

3.) Low confidence

4.) Low consumer spending

Front 25

What is a 'upswing?'

Back 25

A upswing is a period of time immediately after a trough by which aggregate expenditure and economic confidence beings to rise. Usually precedents a Boom.

Front 26

What are the characteristics of a Upswing?

Back 26

1.) Increasing levels of economic confidence

2.) Unemployment begins to drop

3.) Private profit begins to rise

4.) Higher levels of consumer spending

Front 27

What is a 'downswing?'

Back 27

A downswing is a period of time immediately after a boom by which economic confidence and aggregate expenditure begins to lower.

Front 28

What are the characteristics of a 'downswing?'

Back 28

1.) Economic confidence begins to drop

2.) Private profits begin to drop

3.) Consumer spending begins to fall

4.) Unemployment begins to rise

Front 29

What are economic indicators?

Back 29

Economic Indicators are the various means and ways by which Economists may attempt to recognise where the Economy is on the business cycle.

Front 30

What are the three types of Economic Indicators?

Back 30

1.) Leading Indicators

2.) Coincident Indicators

3.) Lagging Indicators

Front 31

What are Leading Indicators?

Back 31

Leading Indicators predict economic trends before direction becomes evident in the rest of the Economy.

Front 32

What are Coincident Indicators?

Back 32

Coincident Indicators appear to move in line with the level of economic activity.

Front 33

What are Lagging Indicators?

Back 33

Lagging Indicators are Indicators that are not expected to show any change until after trends in the rest of the Economy have occurred and been confirmed