Economic Performance

• What is short run economic growth

  Recovery and actual growth - measured in percentage change in RGDP
• What is long run economic growth

  • Potential and trend growth
  • Increase in productive capacity and change in quantity and quality of FOPs
• What are the benefits of economic growth

  • Employment
  • Tax Revenue
  • Government spending
  • Standard of living increases
• What is standard of living measured in

  RGDP per capita
• What are the negatives of economic growth

  • Depletion of resources
  • Inequality (income)
  • Externalities - eg: population
  • Inflation
• Label the diagram

  A) slump

  B) recovery

  C) negative output gap

  D) postive output gap

  E) actual growth

  F) trend growth

  G) peak

  H) slowdown

  I) trough

  J) boom

  
• What is the negative output gap

  • Low inflation
  • High unemployment
  • A lot of spare capacity
• What is the positive output gap

  • High inflation
  • Low unemployment
  • No spare capacity
• What is the boom bust policy

  When the government allows the economy to go into the boom section then busts the economy
• What happens in the recovery to boom section

  It follows the multiplier effect which causes economic growth
• What are welfare benefits

  Prevention from going into deep recession (maintains consumer confidence)
• What are progressive taxation

  Growing income will push you into different tax bracket (prevents overheating)
• What are automatic stabilisers

  Welfare benefits and progressive taxation
• What is short-run economic growth

  The annual percentage change in real national output
• What is the long run economic growth

  An increase in productive potential of the economy
• What is the trend economic cycle

  The average sustainable rate of economic growth over time
• What is the economic cycle

  The natural fluctuation of the economy between period of expansion and contraction
• What is the positive output gap

  Real GDP is greater than the productive potential of the economy
• What is the negative output gap

  Real GDP is below the productive potential of the economy
• What is the definition of unemployment

  When someone is willing and able to work but doesn't have a paid job and is actively seeking employment
• What is the definition of full employment

  Where everybody of a working age who wants to work can find work at the current rates
• What happens to an economy at full employment

  The labour resources are being used efficiently and there is no surplus of unemployed workers
• What is the unemployment calculation

  Number of unemployed people / total people in the labour force (x100)
• How do you measure unemployment

  • Labour Force Survey
  • Claimant Court
• What is labour force survey


  • Largest household study that provides official measures of employment and unemployment circustances
• Who conducts the labour force survey

  The Office of National Statistics
• What are the disadvantages of the labour force survey

  • Sample size may not be representative
  • Monthly estimates are not as accurate as quarterly results
• What is the claimant court

  • An administrative measure of the number of people claiming unemployment benefits from the government (job seekers allowance)
• What are the types of job seekers allowance

  • Contribution based JSA
  • Income based JSA
• What are the disadvantages of claimant court

  • Government has changed criteria for who is eligible for benefits
  • Excludes some people
• What is the definition of structural employment

  A form of employment that occurs when workers skills do not match the job available, often due to long term changes in the economy (involuntary)
• What are the main causes of structural unemployment

  • Technological advancements
  • Deindustrialization
  • Globalisation
  • Changes in consumer preference
• What are the measures to reduce structural unemployment

  • education and training programs
  • regional development
  • incentives for employers
• What is the definition of frictional unemployment

  Short term and voluntary unemployment that occurs when workers look for new employment or transition out of old jobs and into new ones
• What is frictional unemployment also know as

  Transitional unemployment
• What are the main causes of frictional unemployment

  • Geographical Immobility of labour
  • Occupational Immobility of labour
• What is geographical immobility of labour

  Caused by factors such as family ties and local friendships which discourage people from moving to other parts of the country
• What is occupational immobility of labour

  Results from the difficulties in training for jobs that will require different skills
• What are other causes of frictional unemployment

  • Job searching - takes time to find the right job
  • Quitting for a better job - higher pay, better working conditions
  • New workers - recent graduates 
  • Layoffs or Resignations - lose jobs or quit unexpectedly 
  • Unemployment Benefits - people may take longer to find a job
• What are the measures to reduce frictional unemployment

  • Job matching services
  • Labour market information
  • Job searching costs
  • Education / training programs
  • Flexible work options
  • Tax incentives