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Macro Economics 2.1 (Measuring economic Growth and National Income 2.1.2…
Macro Economics 2.1
Measuring economic Growth and National Income 2.1.2
National Income
Monetary value of the flow of output of goods and services produced in an economy
Good for measuring GDP
Total value of national output produced in given time period
Real vs Nominal Data
Real Data
prices held at level of base year
Data expressed at constant prices
Adjusted for inflation
Nominal Data
not inflation adjusted
Monetary values for data
Data expressed at current prices
Measuring RNI
Nominal GDP - no adjustment for inflation
Real GDP is adjusted for inflation and current prices
Turning Nominal into Real GDP
Nominal GDP x 100/price index that year
GNI
GDP + net property income from overseas
Purchasing Power Parity
measures of how many units of one currency can buy same basket of g&s with given amount of other currency
Balance of Payments and Trade 2.1.4
All financial transactions between consumers, businesses, and the gov with other countries
Inflows are positive entry
exports sold overseas
Outputs are negative
Imported g&s
Current accounts is main measure of external trade performance
Items in Current Account
Net investment income from overseas
#
Trade balance in services
Invisibles
Usually in surplus for UK
Trade balance in Goods
Visables
Usually in deficit for UK
Net money transfers
Current account deficit
Net outflow of demand and income from circular flow
Causes
strong exchange rate effecting e/i
recession in one or more maj. trade partner countries
Poor price and non-price competitives
Volatile global prices
Governments want equilibrium
Introduction to Inflation 2.1.2
Sustained increase in cost of living/general price level
Leads to decrease in purchasing power of money
Fall in inflation doesn't = fall in prices
Deflation means price fall
Deflation; decline in price level in an economy - below 0%
Disinflation: a fall in the rate of inflation from 5% to 2%
Prices rising at slower rate
Unemployment & employment 2.1.3
Able, available and willing to work despite active search
Measured in claimant count or labour force survey
Scarce human resources are not being used
Main types of unemployment
Structural
mismatch of skills and opportunities
Cyclical
Caused by fall of aggregate demand
Frictional
Moving between jobs
Seasonal
seasonal changes
Handling Economic Data 2.1.1
Index Numbers
Figure reflecting price or quantity compared with base value
Usually 100
Consumer Price Index
Measures inflation
Representative basket of goods and services
Weights added based on importance to people
Multiplied by price changes, then totalled to find inflation