Study sheet: 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

Measure	What it counts	Geographical basis
GDP	Money produced by nationals and non-nationals	Inside national territory
GNP	Money produced by nationals	Inside the country and elsewhere

Price Changes

Notion	Price movement	Stated consequence
Inflation	General increase	The same money buys less
Deflation	Decrease	Companies may produce less and lay off workers
Disinflation	Increase at a slower rate	Prices still rise, but more slowly