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MACROECONOMIC OBJECTIVES SUMMARY 2011

UNEMPLOYMENT
DEFINING UNEMPLOYMENT
A person is unemployed if they are out of work but available and actively seeking work. If you are of 'working
age' this does not necessarily mean that you are employed or wanting employment, such as students and
housewives. Such people are economically…

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Disadvantages of the Claimant Count

It is open to political manipulation. The Conservative government made 30 changes to the benefit system,
of which 29 made it harder to claim the benefit, thus 'reducing' the level of unemployment.
Many seemingly unemployed people are not counted. e.g. people under 18, those entitled…

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INFLATION
Definition

Inflation is defined as a sustained rise
in the general price level. It is
generally measured in percentage
terms. The Monetary Policy Committee
of the Bank of England aims for an
inflation target of 2% ± 1% using the
CPI.

Measurement - Retail Price Index

The RPI is…

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Shoe Leather Costs - As inflation increases, the opportunity cost of holding cash increases. People will hold
more money in interest-bearing accounts, and more trips to the bank will become necessary.

Costs of Unanticipated Inflation

Confusion of Market Mechanism - Consumer sovereignty relies on producers responding to changes in
prices.…

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ECONOMIC GROWTH
Definition

Actual Economic Growth: A percentage increase in Real Gross Domestic Product over time ­ illustrated by a
rightward shift in the AD curve.
Potential Economic Growth: An increase in the productive potential of an economy illustrated by a rightward
shift in the LRAS.

Measurement of Gross
Domestic…

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Structural Unemployment: As an economy grows its structure changes and demand for certain skills decreases,
resulting in structural unemployment.
Stress & Psychological problems: Professor Yew Nwang Ng has suggested that Economic Growth can create
competitive pressures between families trying to outdo each other materially. This can result in, suicide, stress…

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BALANCE OF PAYMENTS
Definition

This is a record of all monetary payments between one country and the rest of the world over a period of time.

Measurement

The balance of payments account is split into 3 sections, the Current, Capital and Financial Account. You need to
be mostly concerned with…

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Capital Account

This is a minor part of the Balance of Payments, and includes government investment grants, and the purchase or
sale of non-produced, non financial assets such as patents, trademarks and land for foreign embassies.

Net errors and omissions

Formerly known as the balancing item, this figure is included…

Comments

Catherine


davidsalter

This is an 8 page summary which fully covers the use, measurement and determinants of the macro economic indicators.

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