Chapter 7 Flashcards
What is microeconomics?
the study of economic behaviour of individual consumers, firms and industries
What is macro economics?
considers aggregate behaviour, and the study of the sum of individual economic decisions
what does macroeconomics focus on?
overall aggregate demand for goods and services
output of goods and services
supply of factors of production
Government policy
what are macroeconomic policies?
rising economic growth
low inflation
full employment
balanced balance of payments
What are factors affecting the level of business activity?
confidence of consumers and businesses in political stability and economic development
aggregate demand
capital
What is the trade cycle?
a series of fluctuations in the rate of growth of real GDP over its long-run trend
What is economic growth?
arises from an increase in the quantity and or quality of the factors of production in the economy
Policies to promote growth?
Cutting interest rates
running budget deficit
creating stable economy
reducing imports
What are fiscals policies?
concerned with government spending and taxation and therefore government borrowing
What is a government budget deficit?
when government spending exceeds taxation
what is the monetary policy?
the manipulation of the money supply, rate of interest, exchange rates or credit controls
Targets of the monetary policy?
Money supply
interest rates
exchange rates
credit controls
What is the classical view on how to manage money?
do nothing, government wont interfere
What is the demand side (keynesian view) of how to manage the economy?
there is more than one equilibrium of supply and demand. government must intervene
What is the suuply side (friedman monetarist) view of managing economy?
Equilibrium will occur when supply is equal to demand in all markets of the economy
