all theme 2

Question 1

circular flow withdrawals

Answer 1

savings, taxation, imports

Question 2

circular flow injections

Answer 2

investment, government spending, exports

Question 3

AD formula

Answer 3

C + I + G + (X-M)

Question 4

7 economic targets

Answer 4

controlling inflation
reducing unemployment
economic growth
improving BoP
sustainability
reducing inequality
reducing the debt

Question 5

gross income

Answer 5

before tax

Question 6

disposable income

Answer 6

after tax

Question 7

discretionary income

Answer 7

after tax and bills

Question 8

MPC

Answer 8

how much of an increase in income you spend

Question 9

MPS

Answer 9

how much of an increase in income you save

Question 10

wealth effect

Answer 10

as wealth increases spending increases

Question 11

accelerator effect

Answer 11

an increase in GDP leads to a further increase in investment.

Question 12

categories of government spending

Answer 12

welfare spending / transfer payments
reccurring spending / public services
investment projects / state investment

Question 13

multiplier effect

Answer 13

an initial change in AD can have a much greater effect on the final level of national income

Question 14

multiplier calcs

Answer 14

1/1-MPC
1/MPS
1/MPW

Question 15

high multiplier characteristics

Answer 15

spare capacity
MP to M and T low
high MPC

Question 16

low multiplier characteristics

Answer 16

close to capacity limits
high MP to import
high inflation
rising interest

Question 17

output gap

Answer 17

the difference between actual and potential output in an economy

Question 18

short run AS

Answer 18

shows total output in terms of the cost of production

Question 19

long run AS

Answer 19

shows total output when all FOP are in use and full employment. When all factors are variable

Question 20

factors influences LRAS

Answer 20

productivity of labour
workforce population
innovation
capital investment

Question 21

progressive tax

Answer 21

rises as incomes rise

Question 22

proportional tax

Answer 22

marginal rate is constant, constant average rate

Question 23

regressive tax

Answer 23

tax falls as incomes rise

Question 24

discretionary fiscal changes

Answer 24

deliberate changes in tax and spemdinh

Question 25

pollution permits

Answer 25

companies allowed a certain amount of pollution and can sell unused units to companies that go over their permit

Question 26

minimum pricing

Answer 26

setting a floor price which the government doesn’t allow prices to fall below

Question 27

ad velorum tax

Answer 27

the more you purchase the more you spend

Question 28

Gross National Product

Answer 28

GDP + income from foreign residents - domestic income earned by nonresidents

Question 29

retail price index

Answer 29

including mortgage payments

Question 30

current account

Answer 30

trade balance (goods/services) income balance

Question 31

capital account

Answer 31

capital transfers (sale of assets)

Question 32

financial account

Answer 32

FDI (factories etc) portfolio investments (financial assets) other financial items (hot money) reserves

Question 33

frictional unemployment

Answer 33

short term unemployment due to moving jobs

Question 34

structural unemployment

Answer 34

skills are no longer relevant

Question 35

cyclical unemployment

Answer 35

economic reasons

Question 36

seasonal unemployment

Answer 36

parts of the year where a job isn’t needed

Question 37

claimant count

Answer 37

out of work available to work seeking employment 18 - 66 less than £16000 savings

Question 38

ILO survey / labour force survey

Answer 38

out of work for 4 weeks able to start in 2 weeks 16 - 70

Question 39

phillips curve

Answer 39

economics growth leads to less unemployment

Question 40

universal credit

Answer 40

6 combined benefits for working age households with low income

Question 41

privatisation

Answer 41

the transfer of a business or industry from public to private control

Question 42

deregulation

Answer 42

the removal of restrictions in an industry

Question 43

monetary policy tools

Answer 43

interest rates exchange rates QE availability of credit

Question 44

uses of money

Answer 44

payment for goods and services deferred payments exchange value store compare what things are worth

Question 45

QE steps

Answer 45

bank creates money to buy bonds demand increase, price up, yield down those who sold bonds may loan money credit availability increase interest rates fall to follow low rates = more spending lower yields may also mean depreciation

Question 46

QE eval

Answer 46

uncertainty on time and effectiveness BoE owns most of debt already wont benefit lower income households banks may not want to lend weaker £

Question 47

liquidity trap

Answer 47

when interest rates are too low to drop any more and even if they can it will have no effect