What's covered
Key facts
Balance of payments
In a boom, rising incomes and consumer spending pull in more imports, such as cars and household appliances.
Distribution of income
Universal Credit is a payment to help with living costs for people on a low income, out of work or unable to work.
Economic growth
GDP per head (per capita) is calculated by dividing GDP by the population and is used as an indicator of living standards.
Economic objectives of the government
The principal economic objectives of government policy are maintaining full employment, ensuring price stability, achieving economic growth and having a balance of payments.
Employment and unemployment
The Claimant Count is the number of people claiming unemployment-related benefits; since April 2015 it includes Universal Credit claimants required to seek work as well as Jobseeker's Allowance claimants.
Inflation and price stability
Inflation can reduce the real value of debt, benefiting borrowers when real interest rates are negative.
Balance of payments
Low labour productivity raises unit labour costs, weakening price competitiveness and contributing to a deficit.
Distribution of income
Causes of income inequality include differences in education and skills, wage differences between jobs, and wealth accumulated through assets.
Economic growth
GDP can be measured three ways: the value of output produced, everyone's income, or what everyone has spent (expenditure).
Economic objectives of the government
Pursuing a government objective can negatively affect particular groups of people as well as conflict with other objectives; the spec also names moral, ethical and sustainability considerations.
Practice questions with answers
A taste of the 70 questions in this topic, answers marked. Sign up to practise the full set with spaced repetition.
A current account deficit means a country:
- •Has a currency that is falling in value
- •Has more unemployed than job vacancies
- ✓Receives less from abroad than it pays out
- •Spends more than it collects in taxes
Which of these is part of a person's wealth rather than their income?
- •Interest paid on savings yearly
- •Rent they receive each month
- ✓Shares they own in a company
- •Their monthly wages from a job
Which measure is found by dividing a country's GDP by its population?
- ✓GDP per capita
- •Growth rate
- •Nominal GDP
- •Real GDP
Which of these is one of the four principal economic objectives of UK government policy?
- •Lower tax rates
- •Market share growth
- ✓Price stability
- •Profit maximisation
Under the ILO definition, which person counts as unemployed?
- •Full-time student not seeking work
- •No job and not looking for any work
- ✓No job, but seeking work and able to start
- •Part-time job, but wants more hours
Which index is used to measure UK inflation against the official target?
- ✓Consumer Price Index
- •FTSE 100 Index
- •House Price Index
- •Retail Sales Index
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