2.2.1, 2.6.1 2.4.1 2.4.2 - Objectives + Income + Inj/Withdrawals + AD Flashcards
What are the possible macroeconomic Objectives
Balanced budget
Inflation low and stable
Inequality low
Growth stable
Productivity
Unemployment low
Balance of trade
Sustainability
What are the two type of economic agents in macro
Consumers / Households
Firms / Producers:
What do households do in the circular flow of income model
Provide factors of production to earn factor income.
Spend their income on goods and services (consumption)
Maximise utility (satisfaction)
What do firms do in the circular flow of income model
Combine factors of production to produce goods and services
Sell goods and services to households
Maximise profits (= Revenue - Cost)
Total expenditure =
Total output = Total income
What are withdrawals
spending not flowed back to local firms. Imports, Taxes, Savings
What are injections
spending not from local households. Investment, Gov spending, Exports
What are savings
unspent income
What is investment
purchases made by firms
Capital
Man made resources used in production
GDP definition
Total value of final goods and services a country produces in a period.
Real gdp is
Uses base year prices (adjusted for inflation)
Real gdp equation using nominal gdp
Real gdp = nominal gdp * 100/current pl
nominal gdp equation using real gdp
Nominal gdp = Real Gdp * currentpl/100
What is aggregate demand
Total planned real expenditure on a country’s goods and services produced within an economy in a certain period.
