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Economics ME :) > ASA !!!!!!!!! > Flashcards

ASA !!!!!!!!! Flashcards

1
Q

What is SRAS ?

A

The relationship between planned national output and general price level

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2
Q

What are some factors which affect SRAS ?

A

Changes in the price of resources

Taxes , subsidies , regulations and import costs

Supply shocks

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3
Q

What is LRAS ?

A

The relationship between price level and real gdp

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4
Q

What are some factors which affect LRAS ?

A

Changes in the supply of labour
Changes in the efficiency of allocation
Changes in quality of factor inputs
Advances in technology
Improvements in technology

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5
Q

What are some factors which may shift the AD curve outwards ( expansion )

A

Changes to monetary policy

Changes to GOVT fiscal policy

Business and consumer confidence

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6
Q

What are some causes of a shift in AS outwards ? ( expansion )

A

Lower unit costs

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7
Q

What causes the AD curve to shift inwards ( contract )

A

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

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8
Q

What are some causes of the LRAS curve shifting inwards ?

A

Outward migration of skilled workers
Decline in capital investment spending
Higher production costs
Effects of natural disasters

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9
Q

What is a negative output gap ?

A

When actual output is less than what the economy can produce at full capacity

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10
Q

What is a positive output gap ?

A

When actual output is more than full capacity of output

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11
Q

What is consumption ?

A

The act of using a resource

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12
Q

What may increase consumption ?

A

Increase in real incomes
Decrease in taxes + I rates

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13
Q

What may reduce consumption?

A

Increase in taxes , Interest rates
Changes in the economic climate

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14
Q

What is investment ?

A

Spending by firms on capital goods such as machinery + infrastructure

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15
Q

What may increase investment ?

A

Decrease prices of labour and capital

Increase in subsidies

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16
Q

What may decrease investment ?

A

Increase in the cost of labour + raw materials

Increase in Interest rates

17
Q

What is the accelerator theory ?

A

A change in the level of investment in new capital goods induced by a change in national income / output .

Size of accelerator depends on the economy’s output ratio

18
Q

What is the formula for Aggregate demand ?

A

C + I + G + ( X - M )

Consumption
Capital investment
GOVT spending
Net exports

19
Q

What is savings ?

A

A decision by people to postpone consumption

20
Q

What may increase saving ?

A

Decreases in taxes

Increase in interest rates for savers

21
Q

What may decrease saving ?

A

Increased interest rates for lenders

Increased taxes and costs for raw materials

22
Q

What is the savings ratio

A

Measures the actual or realised saving as a ratio of the total disposable income

23
Q

Why is saving needed in an economy ?

A

Business survival during a recession

Used to finance takeovers

Funding capital investment

Buffers for consumers / pay off debts

24
Q

Why may high saving be a problem for an economy ?

A

Not enough spending can create a poor flow of cash for businesses / the CF of income is reduced

25
Q

What is GOVT spending

A

The total sum of money a government uses to finance its activities and functions

26
Q

What are the main elements of GOVT spending ?

A

Essential public services
Social welfare programmes
Education / healthcare
Investment in infrastructure

27
Q

What is the multiplier theory ?

A

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

28
Q

What is net trade ?

A

Difference between a country’s exports and imports

29
Q

What are imports ?

A

What a country buys off another country , They take these products INTO the country

30
Q

What are exports ?

A

What a country sells out to another country , Resources are taken out of the country

31
Q

What is trade surplus ?

A

When a country sells more than it buys / Exports > Imports

32
Q

What is trade deficit ?

A

When a country buys more than it imports . Imports > Exports

33
Q

What is a closed economy ?

A

When a country refuses to participate in international trade with other countries

34
Q

What is an open economy ?

A

When a country decides to participate in international trade with other countries

35
Q

What are injections into the circular flow of income ?

A

Things that put money into the economy / CF of income .

Exports , investment , Govt spending

36
Q

What are leakages ?

A

Expenses that take money out of the CF of income

Like imports - savings - taxes

37
Q
A

Economics ME :) (6 decks)

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