1.1 - Introduction to Macro Economics Flashcards
How do we measure Growth?
Gross Domestic Product (GDP)
What does Output tell us?
Whether the country is able to deliver more goods and services to citizens over time.
What can we use to measure how well our economy is doing?
Output
Unemployment Levels
Inflation
Balance of payments
What is the gap between trend and actual known as?
Output Gap
What are some consequences of unemployment?
Huge Opportunity cost - it is a waste of scarce resources and the lost output can never be recovered. There can also be social unrest if the unemployment rates are high.
What is inflation?
Rise in the general price level.
What is the wage price spiral?
Workers may push for higher wages, which will increase business costs which they may pass on in the form of higher prices.
What is a balance of payments?
Keeping a record of exports and imports.
How may producers/firms wish to maximise profit?
Producing at the lowest cost
What does the Government wish for?
Maximise economic and social welfare of citizens.
What are the four resources?
Labour
Capital
Land
Enterprise
What is the difference between a economic good and a free good?
Free goods have zero opportunity cost.
What is geographical mobility?
The resource can move geographically, e.g Labour can move from one place to another.
What is innovation?
New process of growing - greater productivity,
What is infastructure?
A crucial type of social capital.
What is trend growth?
Average/Long Term Growth
How does trend growth link to actual growth?
If the actual growth is higher than the the trend growth, economy is in a boom. If the trend growth is higher than the actual growth we are in a recession.
What is the definition of unemployment?
Willing & Able but cannot find a job.
What is opportunity cost?
The best alternative forgone.
Why do people have to make choices?
Wants exceed resources.
What is disinflation?
Falling inflation, prices are still rising.
