measurement of macroeconomic performance

Govermenet objectives

Trade

Inflation

Growth

Employment

Redistridutino of income

Stabilty

Short run economic growth

Increased use of previously unemploye resources

Long run economics growth

Growth based or increasing the potential output level of the economy

Why short run growth

Increas in aggregate demand

Increase in short run aggregate supply

What does long run economic growth come from

Increasing the productivity capacity of the economy by increasing the quantity or quality of FoP’s

Factors increasing long term growth

Productivity imrpovements

Investments

Technological advacements

Education and human captal

Resources and infrastructure

Costs of economic growth

1. Increased negative externalities

2. Greater inequality

3. Higher inflation

4. Depletion of natural resources

Benefits of economic growth

1. Higher living standard

2. Easy employment

3. Lower absolute poverty

4. Increase tax revenue

What is economic growth measured by

Measured by GDP

Unemployment

When everyone who is able and willing to work cannot find any work

What is the uks growth rate

1.4%

What is unemployment measured by

Claiment count - how many people are searching for a job but cannot find one

Labour force survey - everyone who could have a job

Demand side factors

Lack of aggregate demand so no need for more employees

Supply side factors

Factors reducing a workers ability to or willingnss to work

Full employment

Everyone who is willing and able to work is employed

Inflation

Sustained increase in the general price levels of goods and services in an economy over times

Why does inflation happen

1. Cost push

2. Demand pull

3. Governent printing money

What is inflation measured by

By the consumer price index

What is the consumer price index

The measurement of 700 household goods ‘the basket of goods’ that are measured each you and compared to the previous year to find the percentage change of price

What is the uks current inflation rate

3.8%

What does balance of payments measure

The current account which measures trade

What is measure in the current account

1. Trade in goods

2. Trade in services

3. Income

4. Transfers

What is the uk net negative in

Trade in goods and transfer

What is the uk net positive in

Trade in services and income

Current account deficit

Overall figure is net negative

Current account surplus

Overall figure is net positive

Conflicts of macroeconomic objectives

Economic growth = inflation

Low unemployment = inflation

Low inflation = low growth / unemployment

Stable balance of payments = low growth