2.1 Flashcards
What is the balance of payments?
The balance of payments is a record of all the financial transactions that occur between a country and the rest of the world
What is the current account?
The current account consists of all the financial transactions related to goods/services along with payments related to the transfer of income
What is a current account deficit?
When imports > exports
What is a current account surplus?
When exports > imports
When the UK is in a current account deficit is AD increasing or decreasing?
When the UK is in a current account deficit AD is decreased
What is unemployment?
Unemployment is when someone isn’t working but is actively seeking work
What are the 2 ways of measuring unemployment?
ILO survey (International Labour Organisation) and the claimant count
What is the ILO survey?
An extensive survey sent to 60,000 random households
What is the claimant count?
It calculates unemployment by counting the number of people claiming job seekers allowance
What is underemployment?
When someone takes a lower skilled job for their skill set
What are the causes of unemployment?
Structural unemployment, demand deficient unemployment, seasonal unemployment, frictional unemployment and real wage unemployment
What is structural unemployment?
When there’s a mismatch between jobs and skills in the economy
What is demand deficient unemployment?
Unemployment caused by a decrease in AD usually in a recession
What is seasonal unemployment ?
Occurs during certain seasons when labour isn’t required
What is frictional unemployment?
When workers are between 2 jobs
What is real wage unemployment?
Occurs when wages are inflexible
What does the circular flow of income show?
Shows the money flow between households and firms
What are the examples of injections into the circular flow of income?
(G) governments spending increases
(I) investment increases
(X) exports increase
What are the examples of leakages?
(S) increased savings by households
(T) increased taxation by governments
(M) increased import purchases
What is the multiplier effect?
The idea that a small first investment leads to a larger change in output
What is the MPC (Marginal Propensity to Consume)?
The proportion of addiction all income that is spent
What is MPS (Marginal Propensity to Save)?
The proportion of additional income that is saved
What is MPT (Marginal Propensity to Tax)?
The proportion of additional income that tax is paid
What is MPM (Marginal Propensity to Import)?
The proportion of income that is spent on imports
