University:
London School of Economics and Political Science
Course:
L400 | International Social and Public Policy
Academic year:

2023
Views:

121

Pages:

5
Author:

Prerna T

Difficulties in interpreting changes in real GDP: Rise in output may be exceeded by a rise in population On average each person will be worse off GDP per capita often used. Existence of informal economy. Informal economy: Economic activity that is not registered or recorded with the authorities in order to avoid paying tax or complying with regulations because the activity is illegal. People will not include all the money they have earned on tax returns. Distorts range of economic data Inflation in informal economy is lower so inflation overstated. ↓ tax revenue Lower productivity Firms in informal economy tend to stay small to avoid attention Can't make use of advanced tech and economies of scale. Economies of scale: Advantage of producing on a large scale, in the form of lower long-run average cost. To see how changes in real GDP impact living standards, composition of real GDP must be considered. ↓ more is produced, but extra output is from capital goods People will not feel better off in short run. ↑ output may be increase in an increase of regrettables i.e. police force to tackle crime. Income may be unevenly distributed. People may be forced to work long hours in worse conditions. Measuring unemployment Unemployed x100%. to find unemployment rate. labour force Unemployment rate: •Percentage of the labour force who are out of Work. • In Uk 2 main ways of measuring unemployment. Labour force survey: Measure of unemployment based on definition of unemployment. Survey of 60,000 households Survey using the ILO Claimant count: Measure of unemployment that includes those receiving unemployment related benefits. •Difficulties of measuring unemployment: •LFS captures more of these people who are unemployed can be unemployed but not receiving benefits. •LFS used in most countries overy suitable for international comparison. •LFS provides a range of information, including changes in economic activity. However •LFS expensive to collect may be subject to Sampling errors. Claimat count data relatively cheap of is a by-product of administrative benefits. quick to compile. records of people claiming