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Define economic growth?

An increase in the value of a country’s production

Define inflation

A sustained increased in the general level of prices

Define unemployment

When workers are willing and able to work but cannot find a job

Define “the balance of trade”

The difference between the value of exports and the value of imports

What are the 7 macroeconomic objectives?

1. A high rate of national income growth

2. A low rate of inflation

3. A low rate of unemployment

4. A beneficial trade situation

5. Protection of the environment

6. An acceptable level of inequality

7. A sustainable level of government

What are the 4 ways to judge macroeconomic performance?

1. Set macroeconomic objective - what a country wants

2. Set macroeconomic targets - the number that would indicate #1 being achieved

3. Look at macroeconomic statistics to see if #2 is being achieved

4. If not, use macroeconomic policies to try and solve the problem

What are the 3 targets for the UK’s performance?

• GDP annual growth of 2%

• Inflation 2% (but between 1% and 3% is fine)

• Unemployment (approximately) 4%

What is the current state of the UK’s performance?

• GDP annual growth of3.2% - not good

• Inflation 3.8% - not good

• Unemployment 4.7% - okay

What is one way of improving balance of trade?

establishing relations with emerging economies and countries with natural resource.

What are some key things that impact the size of an economy?

• Land - natural resources, geology (location - how much land is available to be used for production)

• Capital (technology)

• Labour force

• Enterprise

• Government policy

What is income?

Payment for factors of production

What are the main factors of production?

• labour - wage

• land - rent

• capital

• enterprise - dividends

What are dividends?

Share of profits

Dividends are a percentage of a company's earnings paid to its shareholders as their share of the profits.

What is the circular flow of income?