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Economics ME :) > AG TEST REVISION > Flashcards

AG TEST REVISION Flashcards

1
Q

What is consumption ?

A

The action of using up a resource in an economy

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2
Q

What are things that increase consumption ?

A

An increase in real incomes
Reduction in taxes
Decrease in interest rates
Subsidies and incentives

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3
Q

What things could reduce consumption ?

A

Increases in taxes
Changes in the economic climate
Changes in exchange rates
Reduction in national investment

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4
Q

What is investment ?

A

When firms spend money on capital goods like machinery , infrastructure , resources

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5
Q

What may increase investment

A

Increase in subsidies / support
Decrease in labour costs
Decrease in resources cost

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6
Q

What may decrease investment ?

A

Increases in labour resources
Increases in resources cost
Increase in interest rates

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7
Q

What is the accelerator theory ?

A

The relationship between planned capital investment and the rate of change of national income

E.G:
1. Rapidly growing industry = High demand

2.The firm uses pre existing capacity to use / sell

  1. Expected high demand increases spending + tech to increase the supply capacity to the market

4.Causes a bigger percentage change in demand

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8
Q

What are the key parts of the circular flow of income model ?

A

Households - Income via wages . Buy goods off businesses
Businesses - Hire land labour capital when making products . Sell it for £££
GOVT - collect taxes to fund public services . State spending too
External sector - The UK imports from other countries

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9
Q

What are injections in economics ?

A

The introduction of income into the circular flow model . Things that put money into a countries economy

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10
Q

What are leakages / withdrawals in economics ?

A

The process of taking money out of the circular flow model of a countries economy . For example when the GOVT imports products from overseas

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11
Q

What is aggregate demand ?

A

The total level of planned expenditure on the goods + services produces in an country

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12
Q

What are the components of aggregate demand ?

A

C ) - Household spending
I ) - Capital investment spending
G ) - GOVT consumption / public services
X ) - Exports of goods and services
M ) - Imports of goods and services

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13
Q

What is the wealth affect in Aggregate Demand ?

A

When price increases , the value of income falls for consumers , resulting in less purchasing power . VICE VERSA

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14
Q

What is the balance of trade in Aggregate Demand ?

A

If one country increases the price of a product / service , it could make other imports cheaper . Resulting in a fall of exports and an increase in imports

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15
Q

What is the interest rate effect in Aggregate Demand ?

A

An increase of a price will increase inflation - and increase in demand for money causes an increase in demand for a loans interest rate

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16
Q

What are some examples of a fall in aggregate demand ?

A

Fall in exports
Cuts in GOVT spending
Decline in household wealth
Higher interest rates

17
Q

What are some examples of increases in aggregate demand ?

A

Depreciation in interest rates
Cuts in direct taxes and indirect taxes
Increases of house prices
Expansion of credit and reduction in interest rates

18
Q

What causes shifts in the aggregate demand curve ?

A

Changes to monetary policy - ( change in interest rates , supply of money and credit )

Changes to GOVT fiscal policy - ( changes in taxation levels , spending and borrowing )

Business and consumer confidence - ( Capital investment spending , how willing people are to buy )

19
Q

What are some external shocks to aggregate demand ?

A

Recession / slowdown or boom in trading with countries
Financial crisis / lower levels of credit to businesses
Large change in commodity prices for a country
Slump in housing market

20
Q

What are some factors that affect consumer spending ?

A

Interest rates
Job security
Availability of credit

21
Q

What is saving in economics ?

A

The process of postponing consumption

22
Q

What are somethings that will increase saving ?

A

Decreases in taxes
Increases of interest rates
Consumer confidence ( If low then they are more willing to save )
Availability of credit ( If low then they will try to save more )

23
Q

What are some factors that decrease saving ?

A

Decreases of interest rates ( receive less from banks when in an account )
Increase of taxes
Increased costs of raw materials and labour
If credit is available then they will use others money than their own

24
Q

What is the need of savings in an economy ?

A

Business survival - Used as finance for takeovers + capital investment projects

Buffer for consumers - Saving can reduce consumption during tough times - allows them to reduce debt ( mortgage ) - use savings as for retirement income

Funding investment - Banks need deposits for investment

25
Q

Why might high saving be a problem for an economy ? ( Too much saving )

A

There will be insufficient spending in an economy - less money put back into the circular flow model

26
Q

What is the multiplier theory ?

A

The relationship between a change in aggregate demand and the resulting generally larger change in national income

27
Q

What is net trade ?

A

The difference between a country’s exports and its imports . ( X - I )

28
Q

What are imports ?

A

when a country brings in goods and services from another country .

29
Q

What are exports ?

A

A product or service sold to another country

30
Q

What is trade surplus?

A

The amount by which the value of a country’s exports exceed the value of its imports

31
Q

What is trade deficit ?

A

When a country imports goods and services more than they export them

32
Q

What is a closed economy ?

A

When a country choses not to participate in international trade . E.G Morocco , Vietnam , Brazil

33
Q

What is an open economy ?

A

A country that participates in international trade

34
Q

T

A

Economics ME :) (6 decks)

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