3.2.0 Flashcards
What is the circular flow of income?
A model showing the flow of money, factors of production and goods and services in the economy.
What is a boom?
The peak of the economic cycle with high economic growth.
What is a bust?
A period of time in the economic cycle with the lowest economic growth.
What is a downturn?
The part of the economic cycle that is still rising but slowly.
What is the economic cycle?
Fluctuations in the economy over time.
What is an overheat?
When demand and prices rise too fast so the government have to try and correct this.
What is a reccesion?
2 consecutive quarters of negative economic growth.
What is a recovery?
Where GDP rises again after a recession.
What are 4 examples of demand-side shocks?
Economic downturn in a trading partner, unexpected tax rising, the financial crisis causing bank lending to fall and a bigger than expected rise in unemployment.
What are 4 examples of supply-side shocks?
Steep rise in oil and gas prices, political turmoil/strikes, natural disasters preventing production and severe breakthroughs in technology.
What are short term causes of a recession?
Falling demand can lead to business profits to fall, investment declining, a fall in demand for labour and a rise in cyclical unemployment. It could be a decline in tax revenues, high price decreases, periods of severe deflation.
What are 3 long term economic effects of a recession?
Rising structural long term unemployment, low rates of investment, decreasing capital stock and cuts in public services.
What does aggregate mean?
The total amount per economy(aggregate supply-the total amount of supply per economy)
What is national income?
The value of income, output or expenditure over a period of time.
Aggregate demand formula:
AD=consumption+investment+government spending+(exports-imports)
What are the key factors impacting consumer spending?
Real disposable income, employment and job security, household wealth, expectations and sentiment and market interest rates.
