Stagflation describes a period of inflation when the economy is also in recession
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How do you work out inflation rates?
p2-p1 divided by p1 and then multiplied by 100
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What are limitations of CPI?
Housing costs/average household/ sampling/changing tastes/unrepresentative/changng quality of goods
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What are limitations of RPI?
International comparison/link with interest
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What is GDP?
GDP is a measure of national income produced in a particular country
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What is the difference between norminal GDP and real GDP?
Norminal GDP is the level of GDP at current prices. Real GDP is the level of GDP adjusted to account for inflation
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How do you calculate GDP per capita?
Total GDP divided by total population
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How do you calculate real GDP?
Norminal GDP divided by new year base divide by base year price
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What are limitations of GDP?
Does not show the distribution of income/Does not show the environmental costs/Does not include hidden economy/Exchange rate may distort the value
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What is the balance of payments account?
It is the current account+Financial and capital accounts
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What is the claimant count?
This measures unemployment by counting the number of people claiming benefits for being unemployed.
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What is LFS or (ILO) unemployment?
LFS unemployment is calculated using labour force survey statistics. It uses a questionaire which covers economic activity as well as household size+structure, accomodation details + basic demographic statistics
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What is frictional unemployment?
Where people become unemployed between jobs
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What does the term underemployed mean?
It menas the worker would prefer to work longer hours/ do a more demanding job but is unable to do so
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What is CPI?
CPI is the consumer price index, which is when a basket of goods is collected and compared to last yeas price and weight.
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What is a recession?
A period of the trade cycle when output or growth in output falls.
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What is boom?
A period of time when the economy is growing strongly and is operating above its productive potential
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What is slump?
A period of the trade cycle when there is a particularly deep and long fall in output
Technological advances/changes in relative productivity/changes in education and skills/changes in government regulations/demographic chnges
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What causes a shift in the SRAS?
Wage rates/raw material prices/Taxation/Exchange rates/productivity
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What is the multiplier effect?
An increase in investment or any other injections which lead to an even greater increase in income
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What is investment?
The addition of capital stock of the economy
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What is animal spirits?
Business confidenc; the mood of managers and owners of firms about the future of their industry and the wider economy
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What is APC?
The proportion of total income that is spent
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What is APS?
The proportion of a total income which is saved
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What is MPC?
The proportion of a change in income which is spent
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What is disposable income?
Household income over a period of time including state benefits, less direct taxes
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What is consumption?
Total expenditure by households on goods and services over a period of time
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What is fiscal policy?
It involves the use of government spending, taxation and borrowing to influence both the pattern of economic activity and also the level and growth of aggregate demand, output and employment
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