2.4 Whiteboard Tasks Flashcards
What is National Income?
Total amount of money earned within a country from the production of goods and services over a specific time period, usually one year. It includes wages, rent, interest, and profits earned by individuals, businesses, and the government within the nation’s economy.
What is the circular flow of income?
It demonstrates how money moves from producers to households and back again in an endless loop. In an economy, money moves from producers to workers as wages and then back from workers to producers as workers spend money on products and services.
What’s the difference between income and wealth?
Income is received instantly, while wealth takes a long time to attain. Income has a definite amount, while wealth has no limitation.
Define ‘Marginal Propensity’
The tendency for someone to do something.
What’s the impact of a fall in real disposable income on an AD/AS diagram?
This will reduce the AD and so shift it to the left meaning RGDP will likely fall which will mean a likely negative actual economic growth is achieved.
What’s the impact of a rise in net labour migration into the UK on an AD/AS diagram?
Increased labour, therefore greater Factors of production meaning there is an improved productive capability which means a reduction in inflationary pressure and actual economic growth increases. This means the AS will increase and shift to the right.
What’s the formula for the Multiplier Effect and what does it measure?
1/(1-MPC)
It measure how much impact an injection will have on the economy
What does the Multiplier Effect look like on an AD/AS diagram?
Injections lead to increased AD and the Multiplier Effect leads to further increases in AD. So on a diagram you could see 3 shifts of AD to the right.
What does a negative multiplier effect look like on an AD/AS diagram?
Falling injections decrease AD so less income leads to less consumption which leads to less income and so on. So it would be likely that you could see 3 shifts to the left of AD.
