Definitions Flashcards
What is the big mac index?
a comparative tool used to compare the prices of a Big mac in different countries.
How does something maintain its value?
If other people continue to want it.
Derived demand statement.
The demand for labour is derived from the demand for the goods and services that labour produces.
6 government macro objectives.
Stable Prices (2% inflation +/- 1%),
Steady Economic Growth (2.25% pa),
Full employment,
Favourable Balance of Payments,
Fairer distribution of income and wealth,
reducing the government budget deficit and national debt.
What is a surplus?
When the money coming in is more than the money going out, meaning they haven’t gone over budget.
What is a deficit?
When money spent is more than the budget.
A shortfall of each year
What is a labour force?
The amount of people in the economy who are working or are available to work, includes employed and unemployed.
3 injections into a 2-sector closed economy.
Exports.
Investments,
Government spending.
3 withdrawals from a 2-sector closed economy.
Taxation,
Savings,
Imports.
What is a tax allowance?
The amount of money you are allowed to earn without paying tax on it.
How do governments finance a deficit?
Tam more, Borrow, Sell government owned assets, Print money, Use surpluses from previous years.
What is the consumption function (aggregate demand formula)?
aggregate demand (AD) = consumer spending (C) + business spending (I) + government spending (G) + net exports (X-M)
What is aggregate demand?
the total demand in the economy in a year.
What is the FTSE 100?
100 shares traded on the stock exchange that represent the economy.
What is an Index?
a general average of movements of things going up and down in price.
What is an exchange rate?
the value of one currency compared to another.
What are white goods?
appliances such as fridges, freezers and washing machines.
What is ceteris parabus?
All other things being equal.
What is inflation?
prices rising.
What is deflation?
prices falling.
What is a recession?
two consecutive quarters of negative growth.
3 factors that affect consumer spending.
interest rates,
wealth,
levels of consumer debt
3 factors that affect government spending.
size of the public sector,
debt levels,
stage of the economic cycle.
3 factors that affect business spending.
interest rates,
profit levels,
stage of the economic cycle.