A Level Economics Basic terms

First term

Economic Growth

An increase in the amount of goods and services produced by a country over a period of time.

Nominal GDP

GDP measured at current market prices including inflation.

Real GDP

GDP adjusted for inflation by removing its effects.

Difference between real and nominal GDP

Nominal GDP includes inflation when measuring GDP whilst real does not and removes the effects of inflation.Real GDP is preffered because it shows the true change in production rather than the rising prices.

Inflation

The sustained increase in general price levels of goods and services within an economy over a period of time.

Deflation

Negative inflation rate ( opposite)

Disinflation

A temporary slow down in the rate of inflation.

RPI (retail prices index)

A long standing UK measure of consumer inflation which includes housing costs.

CPI ( consumer price index)

economic measure that tracks change in prices paid by urban households for a market basket of consumer goods and services

What is the difference between CPI and RPI

CPI- exlcudes most housing costs like mortgages.

RPI- includes housing costs like mortgages.

Unemployment

Someone of working age that is not able to get a job but would like to be in full-time employment.

Balance of payments(BOP)

Records all finical transactions made between consumers, businesses and the government in one country with other nations, over a period of time. (how much money a country receives and pays out to the rest of the world)

3 sections are : the current account which records the flow of goods and services, income and current transfers in and out of a country

the capital account- records capital tranfers=very small section

the finicial account-records investment flows and transations in finical assets.

Index number

Number that shows how something has changed compared with a base year. Usually given an index of 100.

Microeconomics

Studies how households and businesses reach decisions abt purchasing savings and etc. Focuses the individual level.

macroeconomics

branch of economics that studies overall working of a national economy. Looks more at the big picture and analysing things like growth, inflation and interest rates.

Current account deficit

When a country imports more goods, services and income than it exports.

interest rate

percentage charged for borrowing money or percentage earned on savings.

interest

extra money paid for borrowing money or earned from saving money.

normative statement

subjective and valued on opinions

positive

claims that can be tested and verified with data

what are the main objectives of a goverment for macroeconomics?

Economic growth low unemployment low and stable inflation balanced trade and fair distrubution of income.

how to convert nominal gdp to real gdp

real gdp= nominal gdp/ gdp deflator x100

gdp deflator= price index that measures the change in prices of all new produced goods and services.

economic cycle

wavy line gdp and economy fluctuating

wanting it to grow at a rate of around 3%

parcipitation rate

the % of population of working age declearing themselves to be in the labour force.

economically inactive

people are those of working age who are not in employment and are not seeking or available for work.

How to measure unemployment

1. labour force survey LFS- household survey and identifies if someone is without a job,actively sought work in the last 4 weeks and are available to start work in the next two weeks.

2. Claimant count- count of people claiming benefits who are required to search for work.This only includes people receiving unemployment related benefits and doesn’t include unemployed people who are not receiving benefits so usually a lower number than LFS.

how to measure inflation

CPI and RPI

how to calculate index numbers

index number=( valu in current year/value in base year) x100

index number allow us to…

Compare over time,measure inflation and economic polices also use them.

Economics

A social science that studies how society allocates its scarce resources in order to satisfy its unlimited human needs and wants.

Economic welfare