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Economics - Macro > Course companion 1 > Flashcards

Course companion 1 Flashcards

Macroeconomic objectives, circular flow of income, AD introduction

1
Q

Definition of GDP

A

Output value of all goods and services produced in an economy

GDP - Gross Domestic Product

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2
Q

Definition of Economic Growth

A

The increase in the value of goods and services produced by an economy over a period of time

Measured on a quaterly basis

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3
Q

Defenition of a Recession

A

A fall in the value of the goods and services produced by an economy over a period of at least 6 months

Negative Economic growth for 2 consecuitive quaters

Measured in the decrease of Real GDP for 2 consecuitive quaters

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4
Q

Real GDP

A

Output value of goods and services produced by an economy adjusted for inflation

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5
Q

Inflation

A

Rise in the general price level of goods and services

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6
Q

Opportunity cost

A

The value of the next best use of alternative resources foregone

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7
Q

Unemployment

A

People who have been looking for work within the last 4 weeks and are available to start within the next 2 weeks

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8
Q

Calculate Real GDP

A

Nominal Value for year
___________________________ x 100
Price index for the year

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9
Q

How to calculate index numbers

A

Value for year X
_____________________ x100
Base year value

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10
Q

Disinflation

A

Fall in the rate of inflation

Rate of increase in prices are lower, but prices are still rising

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11
Q

Deflation

A

Fall in the average level of prices

Prices are actually falling

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12
Q

Exchange rate

A

Value of a currency in terms of another currency

E.g £1 = $2

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13
Q

Government budget

A

The difference between annual tax revenue and government spending

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14
Q

National debt

A

The total stock of debt owed by the government

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15
Q

Income inequality

A

The difference in incomes between those in the top 10% and those in the bottom 10%

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16
Q

Environmental Sustainability

A

?

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17
Q

Supply-side policies

A

Governmental policies designed to promote market forces in in order to increase economic growth

Aim to shift the PPF for the Economy outwards

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17
Q

Supply-side policies

A

Governmental policies designed to promote market forces in in order to increase economic growth

Aim to shift the PPF for the Economy outwards

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18
Q

Demand-side policies

A

Fiscal Policy- The manipulation of govt spending and taxation to affect total demand in the economy
Monetary policy- Use of changes in the base rate of interest and the money supply to influence the rate of growth of total demand in the economy

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19
Q

Monetary policy

A

The use of changes in the base rate of interest and the money supply to influence the rate of growth of total demand and the rate of price inflation

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20
Q

Income

A

Flow of money measured over a period of time

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21
Q

Wealth

A

Stock of assets measured at a point in time

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22
Q

National income

A

The value of the output of an economy over a period of time

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23
Q

Circular flow of income

A

The flow of goods and services betweenhouseholds and firms and their corresponding payments in money terms

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24
Q

Injection (J)

A

Spending which is NOT generated by households

25
Q

Investment (I)

A

Spending by firms on new capital equipment e.g factories, machinery etc

26
Q

Govt Spending (G)

A

Spending by central and local government

27
Q

Exports (X)

A

Spending by residents of other countries on goods/services made in the Uk

28
Q

Widthdrawl (W)

A

Spending which does not flow back to domestic firms

29
Q

Savings (S)

A

Money not being spent by households or forms

30
Q

Taxes (T)

A

Paid to govt from households from households and firms

31
Q

Imports (M)

A

Spending by UK residents (households/firms/govt) on goods/services from abroad

32
Q

Government budget deficit

A

When the government spends (G) more than it reveives in taxation revenue (T) in any 1 year

33
Q

Aggregate demand AD

A

The total of all spending on the economy at any given price level

34
Q

Aggregate demand formula

A

AD = C + I + G + (X - M)

35
Q

Consumption

A

Total spending by households on goods/services in the domestic economy over a period of time.

36
Q

Durable goods

A

Goods that are consumed over a long period of time

37
Q

Non-durable goods

A

Goods that are consumed almost immediately

38
Q

Disposable income (Yd)

A

Household income over a period of time including state benefits less direct tax

39
Q

Saving

A

What isn’t spent out of disposable income

40
Q

Consumption function

A

The relationship between the consumption of households and the factors that determine it

41
Q

Average propensity to consume (APC)

A

Proportion of income spent on goods and services in the domestic economy
APC=C/Yd

42
Q

Marginal propensity to consume (MPC)

A

The proportion of a change in income which is spent on said goods and services an a formula
Change in C / Change in Yd

43
Q

Marginal propensity to consume (MPC)

A
44
Q

Average propensity to save (APS)

A

Proportion of income saved
APS = S/Yd

45
Q

Marginal propensity to save (MPS)

A

The proportion that is saved out of a change in income

46
Q

Nominal values

A

Where the effects of inflation are still incorporated in the data

47
Q

Real value

A

Where the effects of inflation have been taken out

48
Q

Household savings ratio

A

The percentage of household disposable income that is saved

49
Q

Total household savings

A

Household disposable income minus household consumption

50
Q

Interest rate

A

The price of money, I.e, cost to borrowers and the reward to savers

51
Q

Base interest rate

A

The rate at which the bank will lend short-term to the commercial (retail) banks

52
Q

Physical wealth

A

Houses, cars, furniture etc

53
Q

Monetary wealth

A

Cash, money in the bank, stocks and shares etc

54
Q

The wealth effect

A

The change in consumption following a change in asset price e.g house peice

55
Q

Positive wealth effect

A

Rise in consumption as a result of an increase in the value of stock assets that households own

56
Q

Negative wealth effect

A

A rise in consumption as a result of an increase in the value of stock of assets that households own

57
Q

Depreciation or Capital consumption

A

The value of the capital stock used up I.e lost to “wear & tear” over time

58
Q

Employment rate

A

Those employed /total aged 16 to 64 ×100

59
Q

Unemployment rate

A

Those unemployed as a proportion of those active in the labour market ×100

60
Q

Inactivity rate

A

Those inactive / total aged 16 - 64 ×100

Economics - Macro (6 decks)

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