Blink Chapter 13-20 Flashcards
define macroeconomics
the branch of economics concerned with large-scale or general economic factors and concerned with the allocation of a nation’s resources, such as interest rates and national productivity.
the objective of Economic growth?
a steady rate of increase of national income
the objective of Employment?
a low level of unemployment
the objective of Price stability?
a low and stable rate of inflation
the objective of National Debt?
a sustainable level of government. (national) debt
the objective of Income Distribution?
an equitable distribution of income
what is GDP?
it is a measurement of a countrys national income
ways to measure GDP
- Output method
- Income method
- Expenditure method
what does the Output method calculate
the actual value of the goods and services produced
what does the Income method calculate
the value of all the incomes earned in the economy.
what does the Expenditure method calculate
the value of all the spending on goods and services in the economy.
- spending by households (consumption) (C)
- spending by firms (investment) (I)
- spending by the government (G)
- spending by foreigners on exports minus spending on imports (net exports) (X-M)
What is GNI
Gross national income, total income that is earned by a country’s factors of production regardless of where the assets are located.
How to calculate the income earned in assets held in foreign countries
net property income from abroad = (property income from abroad) - (income paid to foreign assets operations domestically)
GNI =
GDP + net property income from abroad
what is nominal GDP
is the value at current prices
what are Real GDP and Real GNI adjusted for?
Real GDP= Nominal GDP adjusted for inflation
Real GNI = Nominal GNI adjusted for inflation
How to calculate GNI and GDP per capita?
GNI per capita = GNI / size of the population
GDP per capita = GDP / size of the population
Limitaltions of national income statistics
- Inaccuracies
- Unrecorded or under-recorded economic activity, informal markets
- External costs
- Other quality of life concerns
- Composition of output
what is the business cycle
the periodic fluctuations in economic activity measured by changes in real GDP.
define:
recovery
boom
recession
trough
Recovery phase: GDP increasing at a rising rate
Boom: the maximum GDP
Recession: 2 consecutive quarters of negative GDP growth (falling GDP).
Trought: contraction comes to an end.
what are the impacts of a recession?
2 consecutive quarters of negative GDP growth (falling GDP). → lay off workers (unemployment rises) → less spending/ low demand → lower rates of inflation.
what are the impacts of a trough?
contraction comes to an end. There will be lower interest rates → demand will slowly increase again → cycle starts again.
what is the OECD Better Life Index
The index allows that comparison of well being across countries
3 measures of economic wellbeing
OECD Better Life Index, Happiness index, Happy Planet index (HPI)
define Aggregate demand
the total spending on goods and services in a period of time at a given price level.
List the 4 components of AD.
- Consumption
- Investments
- Government spending
- Net Exports (eXports revenues minus iMports expenditures) (X-M)
There will be a shift in AD if…
there will be a movement along AD if…
- shift it there is an change (+ or -) in one of the components of AD
- movement along if there is a change (+ or -) in price level
The formula for AD?
AD = C + I + G + (X - M)
