MACRO
- Created by: NadiaRahman123
- Created on: 03-05-15 21:36
study of the relationship economic variables at an aggregate level
- INFLATION: price stability allows markets to operate effectively
- UNEMPLOYMENT: whether FofP are being fully utilised
- ECONOMIC GROWTH: expand productive capacity = more resources available
- TRADE: how the economy interacts with the rest of the world
NOMINAL VALUES: the value of a variable based on current prices (V x P). will overstate changes in economic variables
REAL VALUES: the value of variables taking into account changing prices through time (v x base P)
INDEX NUMBERS: a device for comparing the value of a variable in 1 period with a base observation. (new price/base) x100
POTENTIAL ECO GROWTH: an expanison of the productive capacity of the economy over a period of time. Increase the well being of society by increasing the level of resources. Economic growth leads to an expansion of the productive capacity as its resources expand
GDP: a measure of the total value of g/s produced in an economy in a given period
ACTUAL ECO GROWTH: the rate of growth of GDP per period
BUSINESS CYCLE: a phenmenon whereby GDP fluctuates around its under lying trend
INFLATION: the rate of change the price level over time
price instabilty = investment deterred
CPI: based on the price of a bundle of g/s (180k quotes on 680 goods). Data on spending is used to complie weights. Excludes housing costs. provides a measure of the level of prices but only represents the average household.
RPI: a measure of the average level of prices in the UK. replaced by RPIX (excludes mortgage payments)
CPI replaced RPI as it was a better indictator of policy effectiveness & can be used to compare countries
WORLD INFLATION: stable in the 1950/60s except 1952. Increase in oil prices in 1973 +abandonment of fixed exchange rate which freed monetary policy. 1980s and 90s saw inflation reigned in and expanding economies except for developing countries who couldn't recover from the 1970s.
UNEMPLOYMENT: unemployment and employment can change without changing either side.
CLAIMANT COUNT: the number of people seeking JSA each month. it is an accurate account of who is claiming benefits but some are not eligable and others are unavailable to work
ILO: a meeasure of the % of the workforce who are out of job, looking for job (4weeks) & can start in 2 weeks. This is a sample and is less accurate due to sample variation
Low UE encourages people who can't claim to seek work but high UE doesn't due to competition
BALANCE OF PAYMENTS: a set of accounts showing the transactions conducted between residents and the rest of the world
- Current Account: transaction of g/s + income payments
- Capital Account: transactions in fixed assets
- Financial Account: transactions of financial assets (ex. foreign exchange)
CURRENT:
- the balance of trade in g/s (X-M) negative = M>X
- employment income from abroad
- transaction & grants with international organisations
Overal the BofP = 0 & net errors + omissions ensures every thing balances
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