4.2.2 the macroeconomy Flashcards
what does national income measure
total value of goods and services a country produces in one year
can be measures by gni, gdp, gnp
does an increase in national income indicate growth
not always
if it is REAL then yes
if it is NOMINAL gdp MAY have only increased due to inflation
income =
output = expenditure
what is full employment income
total output in an economy with employment is minimal or at the government target
what is an injection
money that enters the economy
eg exports, gov spending, investments
what is a withdrawal
money that leaves the economy
eg imports, saving, taxation
injections > withdrawals
expansion in national output
injections < withdrawals
contraction in national output
where is macroeconomic equilibrium
AD = AS
components of AD
consumption
investment
gov spend
(exports - imports)
consumption is what percentage of gdp
60%
3 factors affecting consumption
interest rates
confidence
income tax
5 factors affecting investment
interest rates
animal spirits
corporation tax
profits
price of capital
explain the accelerator process
increase in investment, increase in AD, increased confidence
REPEAT
what does government spend not include
transfer payments
3 factors influencing (X-M)
exchange rate
efficiency
global boom
explain the multiplier process
one persons spending is another persons income
increased consumption increased ad increased consumption and so on
MPC
marginal propensity to consume
how much consumption changes in reaction to change in income
MPS + MC
1
calculate multiplier
1/MPS OR 1/1-MPC
8 factors affecting SRAS
change in wages
change in productivity
commodity prices
exchange rates
net outflow of skilled labour
VAT and corp tax
subsidies
technical progress
normal capacity level of output
real gdp where LRAS is
full production potential being used
7 factors impacting LRAS
technology
productivity
education
red tape
demographics
competition policy
migration
explain keynesian lras
price level is fixed until resources are fully employed
