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Economics > 2.1 > Flashcards

2.1 Flashcards

1
Q

What is the balance of payments?

A

The balance of payments is a record of all the financial transactions that occur between a country and the rest of the world

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2
Q

What is the current account?

A

The current account consists of all the financial transactions related to goods/services along with payments related to the transfer of income

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3
Q

What is a current account deficit?

A

When imports > exports

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4
Q

What is a current account surplus?

A

When exports > imports

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5
Q

When the UK is in a current account deficit is AD increasing or decreasing?

A

When the UK is in a current account deficit AD is decreased

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6
Q

What is unemployment?

A

Unemployment is when someone isn’t working but is actively seeking work

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7
Q

What are the 2 ways of measuring unemployment?

A

ILO survey (International Labour Organisation) and the claimant count

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8
Q

What is the ILO survey?

A

An extensive survey sent to 60,000 random households

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9
Q

What is the claimant count?

A

It calculates unemployment by counting the number of people claiming job seekers allowance

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10
Q

What is underemployment?

A

When someone takes a lower skilled job for their skill set

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11
Q

What are the causes of unemployment?

A

Structural unemployment, demand deficient unemployment, seasonal unemployment, frictional unemployment and real wage unemployment

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12
Q

What is structural unemployment?

A

When there’s a mismatch between jobs and skills in the economy

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13
Q

What is demand deficient unemployment?

A

Unemployment caused by a decrease in AD usually in a recession

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14
Q

What is seasonal unemployment ?

A

Occurs during certain seasons when labour isn’t required

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15
Q

What is frictional unemployment?

A

When workers are between 2 jobs

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16
Q

What is real wage unemployment?

A

Occurs when wages are inflexible

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17
Q

What does the circular flow of income show?

A

Shows the money flow between households and firms

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18
Q

What are the examples of injections into the circular flow of income?

A

(G) governments spending increases
(I) investment increases
(X) exports increase

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19
Q

What are the examples of leakages?

A

(S) increased savings by households
(T) increased taxation by governments
(M) increased import purchases

20
Q

What is the multiplier effect?

A

The idea that a small first investment leads to a larger change in output

21
Q

What is the MPC (Marginal Propensity to Consume)?

A

The proportion of addiction all income that is spent

22
Q

What is MPS (Marginal Propensity to Save)?

A

The proportion of additional income that is saved

23
Q

What is MPT (Marginal Propensity to Tax)?

A

The proportion of additional income that tax is paid

24
Q

What is MPM (Marginal Propensity to Import)?

A

The proportion of income that is spent on imports

25
Q

How do you calculate the multiplier effect?

A

1/ (1-MPC) or 1/ (MPM + MPS + MPT)

26
Q

What are the macroeconomic objectives?

A
  1. Economic growth
  2. Low unemployment
  3. Low and stable inflation
  4. Current account equilibrium
  5. Balanced government budget
  6. Environmental protection
  7. Income equality
27
Q

What are the 2 demand side policies and what are their aims?

A

Fiscal policy and Monetary policy. Aims to shift AD

28
Q

What is fiscal policy?

A

The use of government spending and taxation to change AD

29
Q

What is monetary policy?

A

The action of adjusting interest rates and the money supply to change AD

30
Q

What is quantitative easing?

A

Printing more money in order to buy government assets in the open market

31
Q

What is a fiscal deficit?

A

when government revenue < government spending

32
Q

What is a fiscal surplus?

A

When government revenue > government spending

33
Q

What is expansionary fiscal policy?

A

The use of government spending and taxation to increased AD

34
Q

What is expansionary monetary policy?

A

The use of interest rates and quantitative easing in order to increased AD

35
Q

What are the 2 types of supply side policies?

A

Interventionist and market based

36
Q

What are the aims of supply side policies?

A

To increase incentives, to promote competition, to reform the labour market, to improves skills and quality of the labour force, to improve infrastructure

37
Q

What is a market based supply side policy to increase incentives?

A

Reduce income/ corporation tax
Reduce unemployment benefits

38
Q

What is a market based supply side policy to promote competition?

A

Privatisation and deregulations
Trade liberalisation

39
Q

What is an interventionist supply side policy to promote competition?

A

Increased government spending on innovation
Direct support to firms to promote international competition

40
Q

What is a market based supply side policy to reform the labour market?

A

Decrease trade union power
Decrease minimum wage

41
Q

What is an interventionist supply side policy to reform the labour market?

A

Increase government spending on improving occupation mobility

42
Q

What is an interventionist supply side policy to improve the skills and quality of the labour force?

A

Increase government spending on education and healthcare

43
Q

What is an interventionist supply side policy to improve infrastructure?

A

Increase government spending on infrastructure

44
Q

What are the advantages of supply side policies?

A

Increase rate of growth in the economy
Reduce average price levels
Reduce unemployment
Increase value of net exports
Improve infrastructure and quality of life

45
Q

What are the disadvantages of supply side policies?

A

Worse distribution of income
Expensive to implement
Significant time lags

Economics (24 decks)

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