3.2-Introduction to macroeconomics Flashcards
What is the balance of payments (BOP)
The sum of the current, financial & capital accounts which account for all trade & financial transactions for a country
What is the circular flow of income?
A model showing the flow of money, factors of production & goods/services in the economy
What is the current account?
The account that records the visible & invisible trades of a country as well as government aid payments
What is deflation?
A fall in the price level
What is disinflation?
Where prices are still rising but at a slower rate
What are exports?
Goods sent to another country in exchange for money
What are factor payments?
Payments made by firms for factors being used, e.g. wages / salaries to employees.
What is GDP per capita?
GDP divided by the population. Useful for comparing countries & reflects changes in population size.
What is gross domestic product (GDP)
Total value of goods and service produced in a country. Also referred to as Economic Growth
What are imports?
Goods brought into the country in exchange for money
What is income inequality?
Differences in income that exist between the different groups of earners in society (the gap between the rich and poor)
What is inflation?
A rise in the price level
What are injections?
Cash flowing into the Circular Flow of Income
What are leakages/withdrawals?
Cash flowing out of the Circular Flow of Income
What is unemployment?
Members of the labour force that are willing and able to work and seeking employment
What is wealth?
A Collection of assets (houses, land, shares in companies, money saved in bank accounts).
What are the 6 main government objectives?
- Price Stability (CPI inflation of 2% ± 1%)
- Growth of Real GDP
- Falling Unemployment/Raising Employment
- Higher Average Living Standards (national income per capita)
- Stable Balance of Payments on the Current Account
- An Equitable Distribution of Income and Wealth
What are the 6 additional government objectives?
- Balancing the budget and reducing the national debt
- Improving economic well-being
- Better regional balance in the UK economy
- Improved access to public services
- Improved competitiveness
- Environmental sustainability
What are examples of withdrawals/leakages from the circular flow of income?
- Net saving (S)
- Net taxes (T)
- Import expenditure (M)
What are examples of injections into the circular flow of income?
Investment (I)
Government expenditure (G)
Export expenditure (X)
