Chapter 13, 14 Flashcards
Macroeconomics
National economy and government policies
Microeconomics
Demand and supply + Market structures
The national economy
the national output of goods and services is measured as GDP
Factors of production
Land, labour, capital and entrepreneurship
Influences on the national economy
Government
Consumers
Savers
Businesses
Business trade cycle
The continual sequence of rapid growth in GDP, followed by a slow down in growth and then a fall. Growth then comes again and when this has reached a peak the cycle begins again.
Traits of the boom phase
Demand may outstrip supply causing inflation
Businesses tend to be more profitable
Expectations of the future are very optimistic
Traits of the recession phase
Businesses suffering a loss in sales revenue
reducing inventory and cutting back investment
Adds momentum to recession
Inflation
an increase in price levels generally and a decline in the purchasing power of money
Problems of inflation
Fewer people can afford goods
Wage inflation
Exports falling as imports appear cheaprr
Consumers may stock pile fearing price increase
Two types of inflation
Cost push inflation and Demand pull inflation
Cost push inflation
Price rises resulting from an increase in the costs of production of goods and services
Demand pull inflation
Persistent excess of demand over supply
Monetary policy
Government policy on interest rates, exchange rates and money supply
Fiscal policy
Government policy on government spending taxation and borrowing
Expansionary financial stance
Government spending> taxation = increased borrowing
Contractionary fiscal stance
Government spending< taxation = reduced borrowing
Demand curve
Shows the demand at each price assuming that all other variables are constant