Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business and Technology > 18. Macroeconomics > Flashcards

18. Macroeconomics Flashcards

1
Q

What is macroeconomics?

A

National and international branch of economics

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What topics are covered by macroeconomics?

A
  • Measuring size of a country’s economy
  • How to grow the economy
  • Unemployment rates and what affects it
  • Cause of inflation and methods to control it
  • What determines currency exchange rates
  • How imports compare to exports
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are five government policies that influence business?

A
  • Overall economic policy
  • Industry policy
  • Environmental and infrastructure policy
  • Social policy
  • Foreign policy
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What affect does overall economic policy have on businesses?

A
  • Demand
  • Taxation
  • Cost of finance (interest rates)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What affect does industry policy have on businesses?

A
  • Regulation
  • Planning
  • Grants
  • Tariffs/quotas
  • Free trade
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What affect does environmental and infrastructure policy have on businesses?

A
  • Planning
  • Costs (eg carbon and pollution taxes)
  • Transport costs
  • Efficiency
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What affect does foreign policy have on businesses?

A
  • EU compliance
  • World trade organisation
  • Foreign trade
  • Banned exports and imports
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is national income?

A

A measure of the size of a country’s economy. More specifically:

The total value of a country’s final output of all new goods and services produced in a year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does the word final mean when defining national income?

A

The only then last sale is counted to avoid duplication.

Eg if company a sells to company B, and company B sells to the consumer, then only company B’s sale is included in the national income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is consumption/expenditure and income regarding national income?

A

Consumption/expenditure is the amount spent by the customer.

Income is the amount received by seller.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What must consumption and income be?

A

Equivalent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the two main measures of national income?

A
  • Gross domestic product (GDP)
  • Gross national product (GNP)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does GDP stand for?

A

Gross Domestic Product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What does GNP stand for?

A

Gross National Product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What does GDP represent?

A

Total value of income or production taking place in a country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What does GNP represent?

A

Same as GDP but takes into account income earned from abroad and profits earned in a country being sent to foreign investors.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is the net property income from abroad?

A

The difference between income earned abroad and profits remitted to overseas investors.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How do you calculate GDP?

A

GDP =
Household spending
+ Capital investment spending
+ Government spending
+ Exports of goods and services
- Imports of goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How do you calculate GNP?

A

GNP =
GDP
+ Net profit income from abroad

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the circular flow of income?

A

Household provide:
- Labour
- Land
- Capital
(Three are known as factors of production)

In exchange, firms provide:
- Wages
- Rent
- Interest

Firms also produce goods and provide services. In exchange households pay for these.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What are the leakages from the circular flow of income?

A

Injections
- Government spending
- Exports
- Investments
and
Withdrawals
- Taxation
- Savings
- Imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the effect of injections and withdrawals?

A

Injections increase circular flow of income, while withdrawals decrease it.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is aggregate demand?

A

Total demand in the economy for goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is aggregate supply?

A

Total supply of goods and services in the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

How does aggregate demand change when prices decrease?

A

Aggregate demand goes up

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

How does aggregate supply change as prices increase?

A

Aggregate supply goes up

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the term used when aggregate supply and demand are equal?

A

Equilibrium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

How can you stimulate demand?

A
  • Decrease tax (more to spend)
  • Increase government expenditure (government borrowing and spending)
  • Decrease interest rates (cheaper for consumers to borrow and spend)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What limits aggregate supply?

A

When everyone is in employment, so no further goods can be made

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What happens if demand is lower than what could be met by the maximum demand (full employment)?

A

Unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is the increase in aggregate demand to achieve full employment called?

A

The deflationary gap

32
Q

What is the deflationary gap?

A

The increase in aggregate demand to achieve full employment

33
Q

What is the inflationary gap?

A

The amount aggregate demand would need to decrease to achieve full match full employment

34
Q

What is the aggregate demand curve?

A

The line showing what prices occur at certain levels of demand.

35
Q

What does a rightward shift of the aggregate demand curve represent?

A

Economy growth

36
Q

What do leftward shifts of the aggregate demand curve represent?

A

Contraction of the economy

37
Q

What is a negative effect of a fast growth of the economy?

A

Inflation

Can suck in imports to meet demand

38
Q

What is a negative effect of a fast decline of the economy?

A

Mass unemployment

39
Q

What are rightward shifts of the aggregate demand curve caused by?

A
  • Increase in disposable income
  • Consumers saving less
  • Increased government spending
  • More relaxed monetary policy (printing more money)
  • Change in net exports (weakening exchange rates cause foreign buyers to increase, increasing demand)
40
Q

What is the term used to describe consumers choosing to save less?

A

Lower marginal propensity to save

41
Q

What are leftward shifts of the aggregate demand curve caused by?

A
  • Decrease in disposable income
  • Consumers saving more (higher marginal propensity to save)
  • Decreased government spending
  • Stricter monetary policy (printing less money)
  • Change in net exports (exchange rate strengthening decreases foreign buyers, decreasing demand)
42
Q

What causes inflation?

A
  • Demand pull
  • Cost push
  • Import cost inflation
  • Expectation
  • Increase in money supply
43
Q

What is demand pull?

A

Prices are pulled upwards due to:
- Lots of money in economy
- People willing to spend more
- Increasing demand

44
Q

What is cost push?

A

A cost of production increases (eg wages) causing the cost of the product to increase.

45
Q

What is expectation in relation to inflation?

A
  • People expecting inflation
  • Creates higher wage demands
  • Higher wage demands push up prices of products due to cost push
46
Q

How does increase in money supply cause inflation?

A

Causes demand pull

47
Q

What types of unemployment are there?

A
  • Real wage unemployment
  • Frictional unem
  • Seasonal unemployment
  • Structural unemployment
  • Technological unemployment
  • Cyclical unemployment
48
Q

What is real wage unemployment?

A
  • People paid too much
  • Employers can’t afford to keep employees
  • Self correcting as when too many people are unemployed, they will accept lower wage
49
Q

What is Frictional unemployment?

A
  • Temporary unemployment due to move from one job to another
  • Will always occur to some extent
  • Not too important as it’s temporary
50
Q

What is seasonal unemployment?

A

When unemployment patterns in certain sectors line up with seasons.

Eg less building and agriculture jobs during winter

51
Q

What is structural unemployment?

A
  • When the structure of an industry changes
  • Eg UK closing most coal mines
  • More permanent
52
Q

What is technological unemployment?

A

Caused by technological advances

53
Q

What is cyclical unemployment?

A
  • Long term cycle of employment and unemployment
  • Correspond with rise and fall of economy
54
Q

What are the two main policies governments have to control or regulate their economy?

A
  • Fiscal policy
  • Monetary policy
55
Q

What is fiscal policy?

A

Where the state gets it’s money and where it spends it.

56
Q

What is monetary policy?

A

How the state manages the supply of money in the economy. Main methods include:
- Interest rates
- Credit controls (how much institutions, usually banks, are allowed to lend)

57
Q

What is international payments disequilibrium?

A

When imports and exports don’t match.

When importing, you have to convert local currency to foreign currency to pay. When exporting, the buyer converts their currency to your currency. A difference in imports and exports would cause a net sale of the local currency, or a net purchase of the foreign currency

58
Q

What factors other than imports and exports contribute to international payments disequilibrium?

A
  • Interest and dividends received from or paid to other countries.
  • Capital movements (foreign investor buying shares of UK company)
59
Q

What is a trade deficit?

A

When a company imports more than it exports.

60
Q

What is a trade surplus?

A

When a country exports more than it imports.

61
Q

What does a net sale of currency A against B do to their values?

A

The value of currency A goes down compared to currency B

62
Q

How might government deal with international payments disequilibrium?

A
  • Interest rates
  • Exchange rates
  • Import quotas (max import limit)
  • Import tariffs (tax on imports)
  • Procedural methods (stringent safety and testing rules for imports)
63
Q

What causes economic growth?

A

Rise in national income: GDP rises
- Increasing capital goods/physical capital (infrastructure, equipment that improves efficiency)
- Human capital (increasing skill level of workforce)
- Technology (New tech stimulates households to buy)
- Natural resources (eg finding mineral deposits)

64
Q

What are some benefits of economic growth?

A
  • Reduced poverty
  • Better housing
  • Better medical facilities
  • Better education
  • Better public services
65
Q

What are some drawbacks of economic growth?

A
  • Increased inflation
  • Pollution
  • Current account deficit (goods demanded by richer people may stimulate imports if home country cant match demand)
66
Q

What are some functions of taxation?

A
  • Raises government revenue
  • Discourage undesirable activities (eg smoking)
  • Making products match social cost (eg taxing carbon emissions)
  • Redistribute income and wealth
  • Protect home industries from foreign competition (import tax)
  • Stabalise national income (if economy fallsz might need to tax more to avoid borrowing more)
67
Q

What are the three types of taxation?

A
  • Regressive
  • Proportional
  • Progressive
68
Q

What is regressive tax?

A

When a higher % of a poor person’s salary is taxed than a rich person.

Eg with VAT, everyone pays 20%, but that is a higher cost for a poor person than a rich person compared to their salaries.

69
Q

What is proportional tax?

A

Takes the same proportion of income tax from all levels of income.

70
Q

What is progressive tax?

A

Takes a higher proportion of income as income rises.

This is more effective at redistributing wealth.

71
Q

What is direct tax?

A

Paid directly by a person to the revenue authority (eg income tax)

72
Q

What is indirect tax?

A

Collected by the revenue authority from an intermediary (eg VAT or CIS)

73
Q

What is a fixed sum tax?

A

Where a fixed amount is taxed per unit sold. (Eg wine is taxed the same sum regardless of cost)

74
Q

What is ad valorem tax?

A

Tax charged as a fixed percentage of the price of the good. (Eg VAT is 20%)

75
Q

What’s it called when tax is charged as a fixed percentage?

A

Ad valorem tax

Business and Technology (20 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions