Macroeconomic indicators : TIGERS - Trade, inflation, growth, employment, redistribution of income & stability.
non-core objectives: environmental, balancing the budget, distribution of income.
Conflicts between objectives can arise at least in the short run when attempting to achieve them.
Economic growth VS Price stability
Rapid growth in an economy can cause inflationary pressures on the price level. this is especially true in a positive output gap where AD>AS
Economic growth VS Current balance
A growing economy like he UK has high marginal propensity to import and therefore the current account deficit worsens. However countries with high exports during these time like China can experience economic growth.
Unemployment VS Inflation
This can shown through the Philips curve - SR Economic growth cause employment to increase which can increase wage levels. This increases consumer spending and therefore causing inflationary pressure on the price level.
Unemployment VS Inflation
This can shown through the Philips curve - SR Economic growth cause employment to decrease which can increase wage levels. This increases consumer spending and therefore causing inflationary pressure on the price level.
A) Inflation
B) Unemployment rate
Real GDP: The quantity of goods and services produced in an economy. Real GDP is adjusted for inflation, so it is a better measure of economic growth
Real GDP per capita
The is the GDP divided per head of the population and so is the average output per person in a country
CPI - Consumer Price Index
This a measure of inflation by measuring a basket of goods depending on spending patterns that year. The goods are weighted depending on their value.
RPI - Retail price Index
This another measure of inflation but includes housing costs and so the value tends to be higher than the CPI.
The claimant count
This a measure of unemployment by seeing how many people receive benefits from the government such as JSA( Job seeker allowance)
LFS - Labour force survey
This is another measure of unemployment which surveys people directly; out of work for 4 weeks, can start in 2 weeks and are free at least 1h a week. It includes part timers and so the tends to have a higher figure than the claimant count.
Index numbers are used to compare data between years and measures the magnitude of change over time. e.g. The the base year is 2012 so that is 100 and then the comparative year is 2022 with inflation increased by 5% means the 2022 index no. is 105
Short-run economic growth - this is when there is a growth in real output due to the unemployed resources being used
Long-run economic growth - this is when an increase in an economy's potential level of output due to an increase in the productive capacity of the economy. outward shift of their PPF.
GDP= Gross Domestic Product, the total value of all goods and services produced in a country in a year.
Real GDP= the measure of all goods and services adjusted for inflation or price changes.
Nominal GDP=GDP measured at the current market prices removing the effects of inflation.
Inflation is when there is a sustained increase in the general price level.
deflation is when there is a sustained decrease in the general price level. when inflation is below 0%.
deflationary spiral can happen when malignant deflation occurs. An example is the 1929 America deflationary spiral that caused 31% fall in real GDP from 1929-1934 and 13 million Americans to lose their jobs.
full employment = by the Beveridge definition is when unemployment falls to 3% or less
the free market definition of unemployment states that it's when the number of workers whom employers want to hire equals the numbers of workers wanting to work. (which means no unemployment).
indicators measure a countries economicperformance and there are 4 main ones.
national output is measured in two ways the quantity or value. GDP is the value of the national output and is most commonly used.
National output = national expenditure = national income = GDP
Purchasing Power Parity(PPP) is used to accurately measure GDP across countries with different currencies but calculating the true value of money by what it can buy.
The problem with only using GDP:
Hidden economy - there are economic activity that doesn't show up on official data. (Shadow market)
Income inequalities - high differences in income isn't shown through GDP and so it lacks true reflection of countries distribution of income.
Public spending - more money is spent on the people in some countries compared to other.
index numbers are used to make comparisons of data over periods of time.