17- Macroeconomics Flashcards
What is the Public Sector Net Cash Requirement (PSNCR)?
The difference between what the government has spent in the public sector and what it has generated in income
What are the 3 elements PSNCR is composed of?
-Central government net cash requirement
-Local Government net cash requirement
-Public corporations net cash requirements
What is the difference between RPI and CPI?
RPI strips out mortgage payments
What are the 3 types of economic indicators?
-Leading indicators
-Coincident indicators
-Lagging indicators
What is the difference between GDP and GNP?
GNP includes production by domestic owned factors of production held abroad
What is the Consumption function?
Consumption = autonomous consumption + (MPC x disposable income)
C = a + bYd
What is autonomous consumption?
The base level of consumption we must make even with no disposable income i.e. basic necessities
What is the closed economy & no government (simple) multiplier?
1/(1-MPC)
What is the closed economy with a government multiplier?
1/[1-MPC(1-t)]
What is the open economy with a government multiplier?
1/[1-MPC(1-t)+MPM]
What is sterilisation?
Adjusting the money supply in order to compensate for balance of payments surpluses/deficits
What does the money multiplier look at?
The expansion of money based on investment and the banks’ capital ratios
What is the Money/credit creation multiplier formula?
Money multiplier = 1/Reserve requirement
What is the Monetary base (stock of high-powered money)?
The quantity of notes and coins in the economy
What is Narrow money/wide monetary base (M0 & M1)?
Includes notes and coins in circulation and cash equivalents
What is Broad money?
As the ‘M’s’ ascend, there is less liquidity
What is the quantity theory of money (Fisher equation)?
That changes in price levels are mainly caused by changes in the money supply
MV=PT
What equation links Money stock and monetary base?
Money stock = money multiplier x monetary base
What does the long-run Phillips curve show?
It shows the natural rate of unemployment; unanticipated inflation will cause short run fluctuations around the natural rate but wages eventually adjust and the economy returns to the natural rate