2.1

• What is economic growth?

  Increase in real gross domestic product
• What is GDP


  The total amount of goods and services produced in a country in a year
• Define Nominal GDP


  The money value of all goods and services produced by a country in one year
• Define Real GDP


  Nominal GDP adjusted for inflation
• What is the difference between the volume and value of output


  Volume measures the number/amount of goods produced

  Value measures the volume x the price at they were sold at
• What are purchasing power parties?

  Used to compare GDP in different countries, and take account the cost of a "basket of goods" that could be bought in each of the countries
• What are some limitations of using GDP to compare living standards between countries

  Difference in population

  Differences in rates of inflation

  Differences in income distribution

  Difference in exchange rates
• Define inflation


  A sustained rise in the general price level
• Define deflation


  A sustained fall in the general price
• Define Disinfaltion


  fall in the rate at which the general price level is rising
• How does demand-pull inflation occur


  When AD rises faster than AS
• How does Cost-push inflation occur


  Wehn AS decreases
• What is cyclical unemployment

  Lack of spending eg. recession means people are out of work
• What is structural unemployment


  Where industries are in decline and workers skills have become obsolete (out of work)
• What is frictional unemployment

  Where people are between jobs
• What is seasonal unemployment


  Where people are out of work for some periods of the year
• What is classical or real wage inflexibility 


  Where there is problems with the supply side of labour
• What is the balance of payments


  Is a record of international payments over the course of a year
• What is the current account


  records payments for transaction between countries in the present year
• What is the unemployment rate?

  The number of unemployed people as a % of the labour force
• What is underemployment?


  Individuals who are seeking or available for additional work
• How is inflation measured in the UK?


  Consume price index (CPI)