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ECONS AS LEVEL > 4. THE MACROECONOMY > Flashcards

4. THE MACROECONOMY Flashcards

1
Q

National income

A

Total monetary value of all goods & services produced by a country within a given time period

Represents economic activity & living standards

Goods must not be counted twice

Considers net property income from abroad & depreciation

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2
Q

GDP

A

Total ouput produced in a country

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3
Q

Types of GDP

A

Nominal GDP & real GDP

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4
Q

Nominal GDP

A

GDP at current market prices

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5
Q

Real GDP

A

GDP adjusted for inflation

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6
Q

GNI

A

GDP + income earned from abroad

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7
Q

Uses of GDP

A

Measures economic activity within country’s bonrders

not accounting for income earned from abroad

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8
Q

GNI significance

A

Reflects total income of a country

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9
Q

NNI

A

GNI - depreciation

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10
Q

Significance NNI

A

Accounts for loss of value in capital goods over time, giving more accurate measure of sustainable income

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11
Q

Market prices

A

Prices at which goods and services are sold, including taxes and subsidies

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12
Q

Basic prices

A

Prices excluding indirect taxes and subsidies

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13
Q

Adjustment process

A

Subtract indirect tax
Add subsidies
Adjustment reflects the real cost of production in an economy

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14
Q

Gross values

A

Measure of value of goods & services

Include depreciation of capital (e.g machinery, buildings)

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15
Q

Net values

A

Subtract depreciation from gross value to show the true value of an economy’s productive capacity

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16
Q

Closed economy

A

No international trade
Flow of income between households, firms & gov

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17
Q

Open economy

A

Includes international trade, w/ income flowing between households, firms, gov, foreign economies

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18
Q

Injections in economy

A

Additions to country’s income flow
Investments
Government spending
Exports

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19
Q

Leakages in economy

A

Withdrawals from country’s income flow

Savings
Taxes
Imports

20
Q

AD definition

A

Total demand for goods & services in an economy at diff price levels within certain period

21
Q

Formula AD

A

C + I + G + (X-M)

22
Q

Components of AD

A

C (Consumption)
Spending by households on goods and services.

I (Investment)
Spending by firms on capital goods (factories, equipment)

G (Government spending) Government expenditure on public goods and services

(X - M)
Net Exports (Exports - Imports), representing the trade balance

23
Q

Causes of shift in AD curve

A

Increase in AD
Rise in consumer confidence
Gov spending
Business investment

Decrease in AD
Fall in any of the above

24
Q

Determinants of AS

A

Short run
- changes in input cost
- labour productivity
- wage rates
- capital utilisation

Long run
- technological advancemnets
- labour growth

24
Q

AS definition

A

The total supply of goods and services that firms are willing to produce at different price levels

25
Q

Causes of a shift in the AS curve

A

SRAS: Changes in input prices (e.g., wages, raw materials), supply shocks.

LRAS: Changes in resources (e.g., labor force, capital), technological progress

26
Q

Movement along AD/AS

A

Caused by a change in the price level

27
Q

Shift in AD/AS

A

Caused by changes in factors other than price level (e.g., government policies, external factors)

28
Q

Effects of shifts in the AD curve

A

Rightward: Increases output and price level (inflationary pressure)

Leftward: Decreases output and price level (recessionary pressure)

29
Q

Effects of shifts in AS curve

A

Rightward (increased productivity)
Decreases price level, increases output

Leftward (supply shocks)
Increases price level, decreases output

30
Q

Economic growth

A

Increase in an economy’s output over time, measured by increase in real GDP

31
Q

Measurement of economic growth

A

Real GDP growth- adjusted for inflation to reflect actual increases in the economy’s output

32
Q

Causes of economic growth

A

Increase in capital
Technological progress
Improvements in labour
Increased trade

33
Q

Positive consequences of economic growth

A

Higher living standards
Lower unemployment
Greater gov revenue

34
Q

Negative consequences of economic growth

A

Environmental degradation
Inequality
Inflationary pressure

35
Q

Unemployment

A

The condition where individuals who are willing and able to work cannot find employment

36
Q

Frictional unemployment

A

Temporary unemployment due to people moving between jobs

37
Q

Structural unemployment

A

Mismatch of skills and jobs, often due to technological change

37
Q

Cyclical unemployment

A

Due to economic downturns (e.g., recession)

38
Q

Seasonal unemployment

A

Due to changes in demand during different times of the year

39
Q

Negative consequences of unemployment

A

Lower living standards
Reduced gov tax revenue
Social costs
Increased poverty & inequality

40
Q

Inflation deflation disinflation

A

Inflation: A general increase in the price level of goods and services.

Deflation: A decrease in the general price level.

Disinflation: A decrease in the rate of inflation

41
Q

Consumer price index

A

A measure of the average change in prices paid by consumers for goods and services

42
Q

Demand-pull inflation

A

When demand > supply
firms struggle to meet increased demand, imbalance cause price to rise

43
Q

Cost-push inflation

A

When cost of production increases, firms must increase price to maintain profits

44
Q

Positive consequences of inflation

A

Can reduce real debt
Signal economic growth

45
Q

Negative consequences of inflation

A

Reduced purchasing power
Uncertainty
Income redistribution
Higher interest rates

ECONS AS LEVEL (6 decks)

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