Measurement of macroeconomic performance

• Macroeconomics


  The branch of economics that looks at the performance and behaviour of an economy as a whole rather than as individual people, markets or businesses
• What's the difference between objective and policy?

  • objective

  > desired outcome

  > what you aim to achieve

  > target, goal

  • policy

  > what you intend to do/ how to achieve your objective
• Four main macroeconomic objectives:


  1. economic growth
  2. price stability
  3. minimising unemployment and/or raising employment
  4. stable balance of payment
• some other macroeconomic objectives

  • greater income equality
  • environmental sustainability
  • higher average living standards
  • reducing size of national debt
• Economic growth


  An increase in the amount of goods and services produced and consumed in an economy over time
• Price stability (low CPI inflation)


  When average consumer prices for goods and services are constant over time, or when they are rising at a low and predictable rate
• Minimising unemployment


  Raising employment levels
• Stable balance of payments

  The value of exports and imports are in balance over time
• What does conflict of objectives mean?

  > in macro it describes how attempting to achieve one macroeconomic objective might come at the expense of not achieving another

  > some believe that macroeconomic objectives may conflict in the short run but not in the long run
• GDP?

  > gross domestic product

  > the total value of output in an economy over a period of time.
• Why is GDP said to be an estimate?

  Due to there being unrecorded economic activity, GDP is not completely accurate
• Explain the three GDP terms

  1. nominal GDP - doesn't take inflation into account
  2. real GDP - takes into account inflation
  3. GDP per capita - means per person (GDP/population)
• How to calculate % change

  difference/original x 100
• Recession


  • recession is a significant decline in real economic activity spread across the economy, lasting more than two consecutive quarters

  > its normally visible in real GDP, real income, employment, industrial production, and wholesale and retail sales.

  > recessions are often associated with a steep decline in the level of business and household (consumer) confidence.
• What does a PPF Diagram show?

  the different combinations of two goods that can be produced using full employment of resources
• Inflation

  An increase in the average level of prices measured over a period of time
• What are the three main inflation measures?

  RPI

  CPI

  CPIH
• RPI Inflation

  ui;ouhiuh
• CPI Inflation

  iudhil
• CPIH Inflation

  jhdb
• Deflation

  A decrease in the general price level over a period of time
• Disinflation

  A fall in the rate of inflation over a period of time; the general price level is increasing but at a slower rate
• Balance of payments

  A record of a country's transactions with the rest of the world

  > made up of: current account, capital account and financial account
• abcd

  efg
• abcd

  efg
• Unemployment

  Those of working age who are currently out of work but are actively seeking work
• Measures of unemployment in the UK (2)

  1. claimant count
  2. labour force survey
• Claimant count

  uiwfiouew
• Labour Force Survey (LFS)

  frnclei
• Productivity

  Output per unit of input
• Productivity is calculated as a ratio of GDP to hours worked
• Index number

  An index number is a figure reflecting price or quantity compared with a base value.