Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Olly lundie my jigga > Dover, Ben > Flashcards

Dover, Ben Flashcards

1
Q

Injections into CFOI

A

investment
gov spending
exports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Withdrawals from CFOI

A

saving
taxes
imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Components of AD

A

consumption (C)
investment (I)
gov spending (G)
exports minus imports (x-m)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Causes of shifts in short run agg supply

A 
wage rates
raw materials prices
taxation
exchange rates
productivity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Causes of shifts in long runn agg supply

A 
technological advances
change in relative productivity of competing economies
changes in education and skill
changes in gov regulations
demographic changes and migration
competition policy
enterprise and risk taking
factor mobility
economic incentives 
institutional structure of the economy
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are some causes of an increase in AD in the short run?

A

fall in interest rates
fall in exchange rate
income tax lower

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are some causes of a shift of supply left in the short run?

A

wage rate increase
raw material price increase
tax on goods raised

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

When is the labour maret in equilibrium?

A

when the demand for labour is equal to the supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is cyclical unemployment?

A

unemployment due to a lack of demand e.g. recession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is real wage unemployment?

A

when real wage rate is above the market clearing price for labour

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

When the market is in equilibrium what type of unemployment can occur?

A

frictional
seasonal
structural

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

When the market is in disequilibrium what type of unemployment can occur?

A

cyclical

real-wage unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Natural rate of unemployment

A

the proportion that choses voluntarily to be unemployed when in equilibrium.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What does the long run Phillips curve suggest?

A

in the long run the Philips curve is vertical. Attempts by the government to reduce unemployment below the natural rate of unemployment will be successful in the short term, but in the long run will only result in higher inflation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Government policy objectives

A 
national economic performance 
economic growth
unemployment
inflation
the current account balance
government objectives
balance of payments
budgets
income distributions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the output gap?

A

economic measure of the difference between the actual output and the potential output.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the 4 components on the business cycle?

A

expansion
peak
recession
trough

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a recession?

A

business cycle contraction which results in a general slowdown of economic activity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the causes of long term economic growth?

A

land-countries with high natural resources
labour-quality/quantity, immigration
capital-increased overtime to be sustainable
technology-cuts average cost of production
efficiency-way in which factors of production are used together
agg demand-export led growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are the benefits of growth?

A 
life expectancy
more disposable income
housing standards
education
health
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What are the impacts of growth?

A

consumers-rising incomes overtime, but does this actually increase living standards?
firms-existing firms increasing sales, but technology could see markets disappearing
government-tax levels increase, more gov spending
the economy-growth in GDP
current and future living standards-depends who is affected, if only the richest in society, then it wont improve those of everyday households.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Causes of unemployment?

A

frictional-moving jobs
seasonal-change in TandP
structural-demand for labour less than supply
cyclical-demand deficient

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Relationship between cyclical unemployment and the output gap

A

cyclical unemployment occurs if the actual level of income is blow the long run trend level

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Costs of unemployment

A

costs to the unemployed and their dependants-money, skills, motivation etc.
cost to local communities-crime violence
cost to government-benefits, taxpayer, training
cost to the economy–output productivity now and when they come back

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Measures to deal with unemployment

A 
monetary policy
fiscal policy
supply side policies
geographical subsidies
lower min wage
more flexible labour markets
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is inflation?

A

sustained rise in prices across the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is deflation?

A

a sustained general fall in prices

28
Q

What is disinflation?

A

a fall in the rate of inflation

29
Q

How to measure inflation?

A

consumer price index (CPI)

30
Q

Causes of demand pull inflation

A 
excess demand price level rises:
consumer spending rises, interest low, confidence high
firms increase investment
increase in gov spending or lower taxes
demand for exports may rise
31
Q

Causes of cost push inflation

A 
occurs due to rising costs:
increase in wages (main cause)
imports could rise in price
profit increased by firms by raising price
gov raise indirect tax or stop subsidies
32
Q

Effects of inflation

A 
growth and unemployment
competitiveness
redistribrutional costs
psychological and political costs
menu prices
33
Q

Effects of deflation

A 
low confidence
buy cheaper in the future
interest rates low, but real cost of borrowing high
asset values
encourages saving
34
Q

Measures to deal with inflation

A 
monetary policy
supply side policy's
fiscal policy 
exchange rate policy
wage control
monetarism
35
Q

What are the 2 components of the balance of payments?

A

Current account

financial account

36
Q

What is the current account?

A

where the payments for the purchase of goods and services are recorded

37
Q

What is the financial account?

A

flows of money associated with saving, investment, speculation and currency stabilisation are recorded

38
Q

What are the main components of the current account?

A

trade in goods-visibles
trade in services-invisibles
primary and secondary income-primary is loan of factors of production abroad. Secondary is a range of mainly gov transfers to and from overseas organisations

39
Q

Causes of changes in the current account balance

A 
trade in goods and services
price in national goods or services may change
productivity
goods and services are homogeneous
AD may change
40
Q

Disadvantages of a current account deficit

A

instability-funded through borrowing
hot money flows-confidence falls, these hot money flows dry up which bursts the confidence bubble
financial account surplus-foreigners have an increasing claim on your assets
over reliant on consumer spending
loss of confidence-especially foreign investors

41
Q

Advantages of a current account deficit

A

good during a time of inward investment-creates jobs and increases confidence
floating exchange rate-causes devaluation, reduces def
indicates a strong economy

42
Q

Evaluation of running a current account deficit

A

depends on the size of deficit
depends on how your financing it
depends on the country in question

43
Q

Evaluate approaches to dealing with a current account deficit

A

devaluation-increase demand for exports, reduce imports. However only effective if combined PED>1 (Marshal Learner, J curve) ST<1 LT>1
deflationary policies-raising IR and taxes, less DI to spend on imports. Low inflation increases competitiveness of exports. However, must have a high (MPM)
Supply side policies-reduce labour cost, increase investment, increase skills of labour force. However, always long term, could take decades.
protectionism-tariffs quotas to reduce imports good in ST. However, internationally uncompetitive in the LR, business no incentive to improve productive capacity.

44
Q

What are the 2 types of budget deficits?

A

cyclical deficit-gov spending and revenues fluctuate through the trade cycle
structural deficit-that part of the fiscal deficit which exists even when the structural deficit is 0 at the top of a boom

45
Q

What is discretional fiscal policy?

A

the deliberate manipulation of government expenditure and taxes to manipulate the economy

46
Q

What are automatic stabilisers?

A

are expenditures that automatically increase when the economy is going into a recession and fall when incomes rise.

47
Q

What are the concerns with high levels of debt?

A

interest rates-borrowing leads to higher interest rates which could crowd out private sector spending. However, increase in gov borrowing tends to be small and if QE is in operation gov can borrow at virtually 0 interest rates.
debt servicing-depends on rate of interest on current borrowing
rate of inflation-won’t increase if gov borrow, because priv sector spending will fall. Only increase if more money is printed.
credit ratings-increase in national debt can lower the governments and companies credit score.

48
Q

What is Keynes view on unemployment?

A

Keynes maintained that unemployment is the result of insufficient demand

49
Q

Keynes view on multiplier effect?

A

Keynes said there will be a multiplier effect where £1 extra deficit or reduced surplus will lead to a more than £1 increase in GDP

50
Q

Evaluate demand side fiscal policy

A

speed of adjustment-Keynes argue gov could be in ST disequilibrium for years due to lack of demand. Classical argue this is down to failure of supply side policies.
conflicting policies-in high unemployment times, Keynesian economists argue that gov should use fiscal and monetary policies. Whereas after 2008, economists have argued that fiscal should be contractionary and monetary should be expansionary.
national debt-in a recession, expansionary fiscal policy is used to increase demand but this creates more debt. Economists argue that the cost of the long run debt outway the benefits of the short run gain. Keynesian argue as long as inflation doesn’t increase its fine.
Size of multiplier-classical=0 Keynesian=large if well targeted
time lags
fine tuning

51
Q

Outline supply side policies

A

incentives-tax on income, cut benefits, subsidise workers, R&D
competition-privatisation, deregulation, competition policy, industrial policy
reforming labour markets-flexibility, trade union power, migration, min wage.
skills-education and training
infrastructure
growth of small businesses

52
Q

Effects of monetary policy

A

consumer durables-many buy durables on credit, higher the IR the higher the monthly repayments
housing market-usually bought on mortgage, more affordable on low interest rates which encourages investment on houses. Moving house also stimulate purchasing of durables.
wealth effect-increased demand for houses raises house prices which creates wealth effect.
saving-high interest rates encourages saving
investment-lower the rate, more profitable it looks
exchange rate-low interest rates, value of exchange rate falls, foreign goods more expensive, Britain more cheap. Boosts AD through exports.
higher real interest rates-appreciation of currency`

53
Q

What is QE?

A

central bank buys financial assets in exchange for moneyin order to increase borrowing and lending.

54
Q

What is FDI?

A

form of controlling ownership of a business in one country, by an entity based in another country

55
Q

When was FFL introduced and what does it do?

A

2012, £1 of cheap funding for every £20 outstanding loans. Banks get thus fee at 0.25% points a year. Any bank that increases its net lending will be allowed to access more cheap lending at this cost

56
Q

What was the financial sectors role in the 2008 financial crisis?

A

growing too big up until 2008 which led to FC.

57
Q

What is an asset bubble?

A

an asset it something that has value that can be bought or sold. Asset bubbles occur when the price of an asset goes far beyond its long term value. Asset bubbles burst when investors realise that the price is too high and so sell.

58
Q

Why are regulations used for financial stability?

A

prevent harm to customers
prevent collapse
systematic risk

59
Q

What is the exchange rate?

A

the rate at which on currency can be converted

60
Q

3 main reasons why foreign exchange rate is bought and sold

A

international trade in goods and services needs to be financed
long term capital movements occur
enormous amount of speculation

61
Q

How is the equilibrium exchange rate determined?

A

where demand for your currency meets supply

62
Q

What causes shifts in demand and supply curves UK a currency?

A 
rise in UK exports
rise in UK imports
rise in UK interest rates
inflow of investment
speculation
63
Q

Impact of a fall in the exchange rate

A

rise in the value of exports
fall in the value of exports
improved current account

64
Q

If demand is inelastic, what will a rise in the exchange rate lea to?

A

a rise in expenditure

65
Q

What type of inflation does devaluation lead to?

A

cost push

Olly lundie my jigga (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions