aaa Flashcards
What are the 6 main government economic objectives?
- Stable prices
- Steady Economic Growth
- Full employment
- Favourable Balance of Payments
- A fairer distribution of income and wealth
- Reducing government budget deficit and national debt
What are the 4 factors of production?
Land, Labour, Capital and Enterprise.
What are the 3 main methods of calculating national income / Gross Domestic Product?
The income, expenditure and output method.
How do we use the Income Method to calculate GDP?
Wages, Rent, Interest and Profits/Dividends
How do we use the Expenditure Method to calculate GDP?
Consumption, Investment Spending, Government Spending and Net Exports.
How do we use the Output Method to calculate GDP?
Primary ( Farming ), Secondary ( Manufacturing ) , Tertiary ( Services ) and Quaternary ( Info / Data )
How can we reduce government deficit?
Borrow, surplus from previous years and to sell assets.
What is the circular flow of income?
A diagram showing how variants from income go back and forth between firms and households with injections coming into it and withdrawals coming out of it.
What goes from households to firms in the circular flow of income?
Consumer expenditure and the factors for production.
What goes from firms to households in the circular flow of income?
Wages, rent, dividends, interest and goods and services.
What are the injections coming into the circular flow?
Government Spending (G), Bank loans for investment (I) and Exports (X)
What are the withdrawals coming out of the circular flow?
Taxation (T), Savings (S) and Imports (M)
What is the Macro-Economic Consumption Function?
Aggregate Demand (AD) = Consumer Spending (C) + Business Spending (I) + Government Spending (G) + (Exports - Imports [X-M])
What is on the y-axis of The Economic Cycle?
Employment, Income, Spending, Output, Gross Domestic Product, Economic Activity
What is on the x-axis of The Economic Cycle?
Time
What are the main four stages of The Economic Cycle?
Downturn, Peak/Boom, Recession/Trough/Slump and Recovery
What does the dotted line through the Economic Cycle represent?
The Trend Rate of Growth
What is the target for trend rate of growth on the Economic Cycle?
The Target is 2.25% per annum
What is the Economic Cycle also referred as?
The Trade Cycle or the Business Cycle
How can we look out for signs of an economic downturn (8 points)?
- Rising unemployment
- Falling Aggregate Demand - IR changes
- Reduced output
- Falling tax revenues
- Increased government spending on benefits
- Order books of firms get emptier
- Stock market falls
- Reduced consumer confidence and spending
Define interest rates.
Interest rates are the costs of borrowing money and the reward for saving money
Define tariffs.
Tariffs are the taxes placed on imports
Define the saying ‘SPICED’.
Stronger Pound Imports Cheaper Exports Dearer
Define Aggregate Demand.
Aggregate demand is the total level of planned real expenditure on UK produced goods and services
Define what the Aggregate Demand Curve shows.
It shows the level of planned demand for real output is consistent with a particular price level.
What is net imports otherwise known as?
The current account balance of the balance of payments.
What is government spending?
Expenditure by central and local government on goods and services - this does not include welfare benefits.
What are the factors affecting Consumer Spending in Aggregate Demand?
- Interest rates
- Income - Income Tax
- Consumer Confidence
- Stage of the Economic Cycle
What are the factors affecting Business Spending in Aggregate Demand?
- Interest Rates
- Level of Spare Capacity in the Economy
- Stage of the Economic Cycle
- Business Confidence
What are the factors affecting Government Spending in Aggregate Demand?
- Stage of the Economic Cycle
- Government Priorities
What are the factors affecting Exports in Aggregate Demand?
- Levels of Tariffs Overseas
- Stage of the Economic Cycle Overseas
- Exchange Rates
What are the factors affecting Imports in Aggregate Demand?
- Stage of the Economic Cycle Domestically
- Tariffs Domestically
What is the demand for labour derived from?
The demand for labour is derived from the demand for the goods and services that labour produces.
