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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
Injection (J)
Spending which is NOT generated by households
25
Investment (I)
Spending by firms on new capital equipment e.g factories, machinery etc
26
Govt Spending (G)
Spending by central and local government
27
Exports (X)
Spending by residents of other countries on goods/services made in the Uk
28
Widthdrawl (W)
Spending which does not flow back to domestic firms
29
Savings (S)
Money not being spent by households or forms
30
Taxes (T)
Paid to govt from households from households and firms
31
Imports (M)
Spending by UK residents (households/firms/govt) on goods/services from abroad
32
Government budget deficit
When the government spends (G) more than it reveives in taxation revenue (T) in any 1 year
33
Aggregate demand AD
The total of all spending on the economy at any given price level
34
Aggregate demand formula
AD = C + I + G + (X - M)
35
Consumption
Total spending by households on goods/services in the domestic economy over a period of time.
36
Durable goods
Goods that are consumed over a long period of time
37
Non-durable goods
Goods that are consumed almost immediately
38
Disposable income (Yd)
Household income over a period of time including state benefits less direct tax
39
Saving
What isn't spent out of disposable income
40
Consumption function
The relationship between the consumption of households and the factors that determine it
41
Average propensity to consume (APC)
Proportion of income spent on goods and services in the domestic economy APC=C/Yd
42
Marginal propensity to consume (MPC)
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
Marginal propensity to consume (MPC)
44
Average propensity to save (APS)
Proportion of income saved APS = S/Yd
45
Marginal propensity to save (MPS)
The proportion that is saved out of a change in income
46
Nominal values
Where the effects of inflation are still incorporated in the data
47
Real value
Where the effects of inflation have been taken out
48
Household savings ratio
The percentage of household disposable income that is saved
49
Total household savings
Household disposable income minus household consumption
50
Interest rate
The price of money, I.e, cost to borrowers and the reward to savers
51
Base interest rate
The rate at which the bank will lend short-term to the commercial (retail) banks
52
Physical wealth
Houses, cars, furniture etc
53
Monetary wealth
Cash, money in the bank, stocks and shares etc
54
The wealth effect
The change in consumption following a change in asset price e.g house peice
55
Positive wealth effect
Rise in consumption as a result of an increase in the value of stock assets that households own
56
Negative wealth effect
A rise in consumption as a result of an increase in the value of stock of assets that households own
57
Depreciation or Capital consumption
The value of the capital stock used up I.e lost to "wear & tear" over time
58
Employment rate
Those employed /total aged 16 to 64 ×100
59
Unemployment rate
Those unemployed as a proportion of those active in the labour market ×100
60
Inactivity rate
Those inactive / total aged 16 - 64 ×100

Economics - Macro (6 decks)

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