all theme 2 Flashcards
circular flow withdrawals
savings, taxation, imports
circular flow injections
investment, government spending, exports
AD formula
C + I + G + (X-M)
7 economic targets
controlling inflation
reducing unemployment
economic growth
improving BoP
sustainability
reducing inequality
reducing the debt
gross income
before tax
disposable income
after tax
discretionary income
after tax and bills
MPC
how much of an increase in income you spend
MPS
how much of an increase in income you save
wealth effect
as wealth increases spending increases
accelerator effect
an increase in GDP leads to a further increase in investment.
categories of government spending
welfare spending / transfer payments
reccurring spending / public services
investment projects / state investment
multiplier effect
an initial change in AD can have a much greater effect on the final level of national income
multiplier calcs
1/1-MPC
1/MPS
1/MPW
high multiplier characteristics
spare capacity
MP to M and T low
high MPC
low multiplier characteristics
close to capacity limits
high MP to import
high inflation
rising interest
output gap
the difference between actual and potential output in an economy
short run AS
shows total output in terms of the cost of production
long run AS
shows total output when all FOP are in use and full employment. When all factors are variable
factors influences LRAS
productivity of labour
workforce population
innovation
capital investment
progressive tax
rises as incomes rise
proportional tax
marginal rate is constant, constant average rate
regressive tax
tax falls as incomes rise
discretionary fiscal changes
deliberate changes in tax and spemdinh
pollution permits
companies allowed a certain amount of pollution and can sell unused units to companies that go over their permit
minimum pricing
setting a floor price which the government doesn’t allow prices to fall below
ad velorum tax
the more you purchase the more you spend
Gross National Product
GDP + income from foreign residents - domestic income earned by nonresidents
retail price index
including mortgage payments
current account
trade balance (goods/services)
income balance
capital account
capital transfers (sale of assets)
financial account
FDI (factories etc)
portfolio investments (financial assets)
other financial items (hot money)
reserves
frictional unemployment
short term unemployment due to moving jobs
structural unemployment
skills are no longer relevant
cyclical unemployment
economic reasons
seasonal unemployment
parts of the year where a job isn’t needed
claimant count
out of work
available to work
seeking employment
18 - 66
less than £16000 savings
ILO survey / labour force survey
out of work for 4 weeks
able to start in 2 weeks
16 - 70
phillips curve
economics growth leads to less unemployment
universal credit
6 combined benefits for working age households with low income
privatisation
the transfer of a business or industry from public to private control
deregulation
the removal of restrictions in an industry
monetary policy tools
interest rates
exchange rates
QE
availability of credit
uses of money
payment for goods and services
deferred payments
exchange
value store
compare what things are worth
QE steps
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
QE eval
uncertainty on time and effectiveness
BoE owns most of debt already
wont benefit lower income households
banks may not want to lend
weaker £
liquidity trap
when interest rates are too low to drop any more and even if they can it will have no effect
