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69 Cards in this Set
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Economic growth |
Measure of an increase in real GDP. GDP is the total amount of goods and services produced in the country in one year, or the total amount spent, all the total amount earned |
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If an economy has two consecutive quarters of negative economic growth... |
Recession |
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when a country comes out of a recession and quickly goes back in again… |
Double dip recession |
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Standard of living |
Measure of quality of life, including physical assets and consumption and less easily measured viables, happiness, lack of stress, length of hours worked, lack of pollution, and capacity of houses. |
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GDP per capita |
Total GDP divided by population, gives a better indicator of incomes |
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5 things evaluation of growth figures depends on |
1) well off the country is 2) how much output is self consumed 3) methods of calculation and reliability of data 5) spending by gov eg eduction? |
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5 things evaluation of growth figures depends on |
1) well off the country is 2) how much output is self consumed 3) methods of calculation and reliability of data 5) spending by gov eg eduction? |
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Doesn't increase in the volume of output mean that there is an increase in the value of output? |
No |
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Inflation |
Sustained rise in the general price level, it's a weighted average of spending of all households in the country. |
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How is inflation measured and why is changes in RPI used? |
Changes in CPI are used to measure, given as index number relative to the base year doesn't include housing costs, so RPI may be used in data for comparison with CPI |
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How is inflation measured and why is changes in RPI used? |
Changes in CPI are used to measure, given as index number relative to the base year doesn't include housing costs, so RPI may be used in data for comparison with CPI |
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What is used to find the rate of inflation that represents changes in cost of living that households experience ? |
1) weights assigned to each item showing proportion of income spent 2) price survey , change in price of 650 goods and services |
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How is this then measured? |
Price change x weights = price index Inflation = percentage change in this index over consecutive years |
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What is the inflation target? |
2% |
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How is this then measured? |
Price change x weights = price index Inflation = percentage change in this index over consecutive years |
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What is the inflation target? |
2% |
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Who are the MPC and what do they do? |
Monetary policy committee |
Set base rate of interest |
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How is this then measured? |
Price change x weights = price index Inflation = percentage change in this index over consecutive years |
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What is the inflation target? |
2% |
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Who are the MPC and what do they do? |
Monetary policy committee |
Set base rate of interest |
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When has MPC failed to reach their target? |
Inflation rises above ceiling (3%) or below floor (1%) |
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How is this then measured? |
Price change x weights = price index Inflation = percentage change in this index over consecutive years |
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What is the inflation target? |
2% |
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Who are the MPC and what do they do? |
Monetary policy committee |
Set base rate of interest |
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When has MPC failed to reach their target? |
Inflation rises above ceiling (3%) or below floor (1%) |
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What is a measure intended to reduce rate of inflation? |
Raising interest rates |
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If interest rates are cut it's a signal... |
Inflation isn't a threat |
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2 ways CPI may not be a true representation |
1) doesn't include housing costs 2) some people don't have representative spending patterns, cost of living might rise more or less than average shown by CPI |
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Those people who are at work or who are willing to work |
Workforce/ economically active |
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1) how is employment measured? 2) how is unemployment measured? |
1) no. of people at work / total no. of economically active x 100 |
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1) how is employment measured? 2) how is unemployment measured? |
1) no. of people at work / total no. of economically active x 100 2) no. of people out of work / total no. of economically active x 100
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2 measures of unemployment |
1) ILO measure - uses a questionnaire for 16-65 whether they have been out of work in the last 4 weeks and ready to start in 2 weeks 2) claimant count - records people who have successfully claimed job seeker allowance |
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Cyclical unemployment |
Lack of spending means people are out of work |
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Cyclical unemployment |
Lack of spending means people are out of work |
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Where industries are in decline and workers skills are becoming obsolete... |
Structural unemployment |
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Cyclical unemployment |
Lack of spending means people are out of work |
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Where industries are in decline and workers skills are becoming obsolete... |
Structural unemployment |
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Classical |
Problems with the supply side of labour (eg minimum wage too high) |
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Cyclical unemployment |
Lack of spending means people are out of work |
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Where industries are in decline and workers skills are becoming obsolete... |
Structural unemployment |
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Classical |
Problems with the supply side of labour (eg minimum wage too high) |
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Frictional |
People are between jobs |
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2 costs of unemployment to a person |
1) no income 2) skills obsolete, loss of confidence |
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2 costs of unemployment to a person |
1) no income 2) skills obsolete, loss of confidence |
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Cost of unemployment to firms |
People don't spend as much in shops |
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2 costs of unemployment to a person |
1) no income 2) skills obsolete, loss of confidence |
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Cost of unemployment to firms |
People don't spend as much in shops |
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Cost of unemployment to government |
Have to spend more on Jobseeker's Allowance |
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Cost of unemployment to government |
Have to spend more on Jobseeker's allowance, receive less in income tax and other taxes |
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JSA |
Payment made to those who are willing and able to work but aren't currently in employment |
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4 benefits of employment |
1) increase incomes- SoL increased 2) improved skills 3) multiplier effects 4) higher gov taxation revenue |
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Define: 1) migration 2) immigration 3) emigration |
1) migration- overall balance between immigration and emigration in a country 2) immigration- entering country 3) emigration - exiting country |
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1 positive and 1 negative of immigrants |
1 positive- full in vacancies, increased employment 1 negative- displace others from work, or don't find it, unemployment may increase |
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A record of international payments over the course of the year |
Balance of payments |
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A record of international payments over the course of the year |
Balance of payments |
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What 4 things does the current account comprise? |
1) trading goods 2) investment income (interest profits and dividends) 3) transfers (tax payments to foreign governments) |
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A record of international payments over the course of the year |
Balance of payments |
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What 4 things does the current account comprise? |
1) trading goods 2) investment income (interest profits and dividends) 3) transfers (tax payments to foreign governments) |
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Current account deficit |
More money flowing out of the county than flowing in on the current account |
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Some causes of current account |
1) currency too strong relative to other countries 2) high inflation realtor to other countries 3) high wage costs 4) high level of growth, higher incomes tend to buy products from abroad |
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Some causes of current account |
1) currency too strong relative to other countries 2) high inflation realtor to other countries 3) high wage costs 4) high level of growth, higher incomes tend to buy products from abroad |
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More money flowing into country than out |
Current account surplus |
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Some causes of current account |
1) currency too strong relative to other countries 2) high inflation realtor to other countries 3) high wage costs 4) high level of growth, higher incomes tend to buy products from abroad |
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More money flowing into country than out |
Current account surplus |
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Causes of current account surplus |
1) relatively undervalued exchange rate eg Germany better German competitiveness than its European neighbours, Germany has had more competitive exports 2)low rates of inflation 3) low wage costs 4) low level of growth in a country - difficult to buy imports, incentive to export |
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Human development index |
Measure off quality of life which has 1/3 weighting for education, 1/3 weighting for health, 1/3 for GDP per head at PPP |
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Human development index |
Measure off quality of life which has 1/3 weighting for education, 1/3 weighting for health, 1/3 for GDP per head at PPP |
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When values of income are expressed at PPP it means that the exchange rate used is the one where the same basket of goods in the country could be bought in the USA at this rate of currency exchange... |
Purchasing Power Parity |
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Problems with HDI |
1) no strong indicator of change in living standards in future 2) doesn't indicate that deprivation e.g. people without water 3) not clear on poverty lines, how hard life might be 4) other measures might be useful in conjunction with HDP or HDI to give a broader picture of how well a country is developing |
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