This document summarizes the basics of the Macro side of the Economics A level course. with an introduction into the seven Macroeconomic objectives with detailed explanations of each and their connection to the economy, the summary also include definitions of key terms and diagrams relating to key ...
GDP- limitations when comparing
Theme 2 (2.1: Measures of EconomicPerformance) living standards:
Income transfers inflowand outflow
=
of remittances to home countries. Current account surplus inflows> outflows
=
GDP is the value of all the Benefits ofeconomic growth may Current transfers = inflow and outflow Current account deficit outlows > infiow
=
VEconomic growth is
goods and services
Purchasing power parity (PPP) is
used to compare the living
accrue only for a small proportion of of loans or grants.
BoP is a record of all
simply the increase in the the population.
number of goods and produced in a country over standards between countries. the transactions
High GDP does not necessarily mean
a specified period oftime. between one
services produced in an
economy.
** £10 can buy more things in India people are happier. Components of BoP: Balance of economy and its
than it can in the UK. Hence, PPP
Measured by Current account trading partners.
National wellbeing measures
calculating the rate
accounts for the different price
levels in countries. GDP- few useful distinctions:
a
Capital and financial payments
of change of GDP. Real GDP= GDP adjusted for inflation. account Trade makes economies
how satisfied people are in Nominal GDP = GDP not adjusted for interconnected with each
their lives.
It is measure a inflation. ---------. other. If a country imports
which incorporates things like Total GDP= total number of goods and Current account=
trade in goods andservices most of its raw materials, then
income, health, environment
and education.
Economic growth Measures of
services produced in an economy in a
i+ income transfers +Current transfers
a recession in the exporting
given time period.
country wil also affectitthe
Evidence suggests
(C In orderto compare growth rates
national income:
GDP
GNP
GDP per capita = GDP per person
Value of GDP = monetary worth
Volume of GDP = quantity of goods and |It can be risky ifa country relies heavily on one major
importing country, as
deprived of resources to
will be
produce more products. There
a positive relationship between between countries and overtime, export, e.g. commodities. A fall in demand will lead to
income and happiness GNI services produced may be massive job losses and
however, after a certain point
|it isbetterto use data that can be huge job losses and a reduction in AD (and growth). la fall in the growth rate.
comparable, e.g. GDP percapita,
there is no clear link.
rate of change of real GDP. GNP= value ofgoods UK's growth rate in Huge reliance on imports can lead to massive debts.
and services produced 2015 was 2.15%
GNI = incomes of by the citizens of a
Real GDP | Population
Year citizens ofa country country, both
Since the
Unemployment is when someone is out of work
(Etr) m) earned domestically domestically and beginning of
and is looking for work. Note that people who
are
2000 1.5 58.9 and abroad. abroad. 2016, UK's
not looking for work are not classified as being
2015 2.7 64.1 unemployment
unemployed.
The above table shows some data for the UK rowt e2.7-15x 100 80% ..rate has been
Underemployment is when a worker is not
Unemployment
1.5 5%.
working to his/her potential. Also includes people
for the years 2000 and 2015. Find out:
Working parttime.
a) what the growth rate was between these "
two years
GDP per 2,700,000,000,000
64,100,000
42,121.68
b) what the GDP per capita was in 2015 Causes of unemployment: Effects of unemployment:
Structural unemployment= when workers do not have High rates of unemployment
the right skills employers want.
when workers are
reduce ADlow growth.
Inflation = increase in prices
UK's target inflation rate is 2%. And Frictional unemployment =
moving Adversely affects people's
Inflation Deflation =fallin prices recently it has tended to stay around % between jobs.
Seasonal unemployment = when demand for a good or
psychological wellbeing.
Disinflation = falling rate of increase (2.17% in June 2016). However, Government loses in tax
following the Brexit vote, it has surged service is low at certain times of the year, e.g. tourism. revenues and needs to spend
to 2.52%. Cyclical unemployment = when workers lose jobs due to more on welfare.
Causes of inflation:
slowdown in growth, e.g. in a recession.
Demand pull -demand pulls prices with it (ie. a
demand pulls prices up).
rise in
Measures of CPI uses prices of a 'basket of Real-wage inflexibility when supply of labour does not
=
everyday goods that are compared adjust to a fll in demand for labour. Wages tend to
Cost
push-high costs of production push prices up. inflation: over time.
remain high, causing unemployment. If the number of people
Growth in moneysupply-increases demand for goods. CPI RPI includes housing costs and uses
employed increases over time, it
RPI does not necessarily mean that
arithmetic mean, which is why it gives Immigration can increase the
Effects of inflation: a higher estimate of inflation. supply of labour in the host
unemployment is falling. In fact,
Measures of unemployment: it could be rising as wellif
Creates uncertainty consumers may be unwilling to country. However, they need
is also rising.
spend ADfalls to have the right skills. Claimant count population
Loss of international competitiveness exports fall Limitations of CPl: UK Labour Force Survey
Savings are now worth less. Prices could change due to changes in quality.
People on fixed incomes will see purchasing power Temporary shockscan exaggerate inflation figures.
The ILO measure is based on a survey of nearly Claimant count simply tells us
decline. A typical'basket of goods could be different for different
Menu costs-firms need to update all prices. groups of consumers (e.g. students, pensioners).
40,000 households and measures unemployment how many people claime
Jobseekers Allowance in a given
Shoe leather costs-consumers will have to spend Price rise for certain goods may induce a rise in demand for based on certain criteria-e.g. people need to be
period of time.
its substitutes, which is not entirely captured by CPl. unemployed for at least a month.
more time and energy trying tofind cheaperoptions. -
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller pathtosuccess1. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £3.49. You're not tied to anything after your purchase.
