Study guide: Economics Basics and Indicators

📋 Course Outline

1. Economic Indicators and National Output
2. Trade Balance and Trade Outcomes
3. Tariffs and Trade Agreements
4. Supply, Demand, and Price Changes
5. The Primary Economic Sector

📖 1. Economic Indicators and National Output

🔑 Key Concepts & Definitions

• Economic indicators: Figures, statistics, or indexes used to understand the evolution of an economy over time or across countries.
• Gross domestic product: The money produced within a country’s national territory by both nationals and non-nationals.

📝 Essential Points

• Examples of economic indicators include:
  • the price index
  • the minimum wage
  • the unemployment rate

💡 Memory Hook

GDP counts production inside borders, whereas GNP counts nationals’ production wherever it occurs.

📖 2. Trade Balance and Trade Outcomes

🔑 Key Concepts & Definitions

• Trade balance: The trade balance compares a country’s exports with its imports.

★ Must-know

📌 A country has a trade surplus when it exports more than it imports.

📌 A country has a trade deficit when it exports less than it imports.

Further detail

📌 A trade deficit means that a country spends more than it earns, whereas a trade surplus means that it earns more than it spends.

💡 Memory Hook

Trade surplus means earning more than spending, whereas trade deficit means spending more than earning.

📖 3. Tariffs and Trade Agreements

🔑 Key Concepts & Definitions

• Tariff: A special tax paid when a good crosses a border during an import or export transaction.
• Trade war: A trade war occurs when one country puts a tariff on another country’s products and the other country responds with a tariff on the first country’s products.

★ Must-know

📌 The importer pays the tariff when an imported good crosses a border.

📌 Reciprocal tariffs apply mutually to products traded in both directions between two countries, whereas a unilateral tariff is imposed by only one country.

Further detail

• A French company exporting to Germany does not pay tariffs because the transaction occurs within a free trade area, whereas exporting to Switzerland involves tariffs.

💡 Memory Hook

A border crossing triggers a tariff, which raises the importer’s cost.

📖 4. Supply, Demand, and Price Changes

🔑 Key Concepts & Definitions

• Consumer Price Index: The Consumer Price Index (CPI) measures price changes using a basket of approximately 20 products checked every month rather than every product on the market.
• Inflation: The general increase in the prices of goods and services over time, which means that the same amount of money buys less.
• Deflation: A decrease in prices that can lead companies to produce less, earn less money, and lay off workers.
• Disinflation: Prices continue to increase but do so more slowly.

★ Must-know

📌 The law of supply and demand states that supply and demand have to meet at the same point.

• The CPI gives an idea of price evolution but does not provide a precise measure because its basket does not include products such as gasoline and electricity.

Further detail

📌 According to the course, increasing supply requires increasing demand, while decreasing supply requires decreasing demand.

💡 Memory Hook

Supply and demand meet at one point; a lower supply or demand makes the product rarer.

📖 5. The Primary Economic Sector

🔑 Key Concepts & Definitions

• Primary sector: The sector that extracts or harvests products from the earth and usually includes the packaging and processing of raw materials.

★ Must-know

• The proportion of workers in the primary sector is decreasing in most countries.

📌 A country that wants to be independent must produce its own agricultural goods, making the primary sector important for national independence.

Further detail

• The primary sector represented 3.1% in Estonia in 2018.

• The primary sector represented 1.11% of workers in the United Kingdom in 2017, 1.05% in 2019, and 0.99% in 2023, with the proportion still decreasing.

💡 Memory Hook

Producing domestic agricultural goods supports national independence.

📊 Synthesis Tables

GDP and GNP

Price Changes