macro

• macroeconomics - examines the whole of the economy and how it works
• AD = aggregate demand
• AD = C + I + G + (X-M)
• Gross domestic product (GDP) is the market value of all the finished goods and services produced by factors of production based in a country during a particular year
• economic growth - a change in the production of goods and services compared from one period of time to the next.
• Recession occurs when there are 2 consecutive quarters of negative economic growth
• nominal GDP - the market value of goods and services produced in an economy without the effect of inflation
• real GDP - uses inflation to measure and reflect the value of all goods and services produced by an economy in a given year.
• real GDP = nominal GDP x (price index of base year/ price index of current year)
• unemployment - A situation where people are out of work but are willing and able to work
• labour force - includes all those who are economically active (willing and able to work) - the employed and unemployed
• Rate of unemployment = (unemployed/labour force) x 100
• employment - the number of people who work
• working population - The total population in an area is able and likely to work based on the number of people in an age range. 15-66
• employment rate - The number of people of working age in the population who are part time or full time
• ER = employed / WAP (working age population) x 100
• labour force partition rate - The percentage of the working age population that is currently employed or actively seeking employment
• labour force partition rate = Labour force/working age population x 100
• primary Sector – extraction of raw materials from LAND e.g coal, oil, gold, air, fish, forestry, crops.
• Secondary Sector – manufacture of raw materials into a product in factories using plant & machinery.
• Tertiary Sector – the service sector where products and services are sold to the consumer e.g. retail stores, restaurants, cinema, banking, insurance.
• inflation - a rise in the general price level of goods and services in the economy
• Dis–inflation - when the rate of inflation falls so prices are STILL rising but a slower rate
• Deflation - the price level falls as the inflation rate is negative
• Hyperinflation - very rapidly rising inflation usually defined as over 50% per month
• Problems measuring inflation:

  • Quality of the goods changes
  • Goods can become outdated
  • Short term inflation - tax, interest rates
• CPI measures the average prices of the goods and services consumed by households
• RPI is a measure of consumer inflation that considers the change in the retail prices of goods and services
• The exchange rate is the price of a currency in terms of another currency or currencies.
• Imports are goods/services purchased from abroad
• Exports are goods/services produced in an economy and then sold abroad
• If the value of a currency falls in relation to the value of another currency then the exchange rate has Depreciated
• If the value of the currency rises against that of another currency then it is said to have Appreciated
• If the value of a currency falls in relation to the value of another currency then the exchange rate has DEPRECIATED. This means that one pound now buys fewer units of another currency.
• Weak, Pound, Imports, Dearer, Exports, Cheaper (WPIDEC)
• If the value of the currency rises against that of another currency then it is said to have APPRECIATED. This means that one pound now buys more units of another currency.
• Strong, Pound, Imports, Cheaper, Exports, Dearer (SPICED)
• Trade in Goods – balance of goods exported to good imported for a nation
• Trade in Services – balance of services exported to services imported for a nation
• Primary Income (Income) – balance of incomes earned by residents abroad compared to incomes sent abroad by foreign nationals working in a nation. It also includes the balance of investment incomes abroad compared to the investment incomes earned by foreigners in the UK e.g. dividends on shares in companies.