econ dal workshop Flashcards
what is the memory device used to remember non price factors for demand
Population
Advertising
Substitute
Income
Fashion/interests
Interest rates
Complementary good
what is the memory device used to remember non price factors for supply
Productivity
Indirect tax
Number of firms in market
Technology
Subsidy
Weather
Cost of production
what is the memory device for the price mechanism
Signals for more/lkess resources
Incentive to decrease/increase output
Rations via less/more demand
Allocative efficiency
why is (Q,P) = Allocative Efficiency(2)
- maximising of society surplus
- maximising of net social benefit
what are 3 characteristics of free market forces
- no surpluses/ shortages
- low prices , high quality/choice
- no gov. failure
what is market failure
when the allocation of resources does not maximise social benefit
what is government failure
when costs of intervention outweigh the benefits, worsening resource allocation
what are the costs of government intervention
- costs
- unintended consequences
- imperfect information
what is the UK inflation rate
3.4%
what is the UK unemplyment rate
3.9%
what is UK’s annual wage growth
5.6%
what is the UK current account deficit as % of GDP
2.5%
what is the goal of macroeconomic objectives
to be achieved at the same time
how to show the multiplier effect on a graph
show further AD increase(AD1 -> AD2 -> AD3)
what is the formula for the multiplier effect
1/mpw
what are the determinants of the value of the multiplier
- savings
- imports
- taxation
what is economic growth
an increase in real GDP via an increase in AD or LRAS
how to measure capital
interest
what are the drawbacks of using GDP to measure economic growth
- doesnt take into account informal activity
- environmental costs
- income inequality
- remittance is not recorded
what are the benefits of economic growth(4)
- higher incomes
- jobs(less unempoyment -> derived demand)
- higher profits
- fiscal dividends
what are the costs of economic growth(4)
- inflatin(demand pull)
- income inequality
- negative externalities
- current account deficit
what is unemplyment
- working age
- willing and able to work
- actively seeking
- do not have a job
what are disadvantages of using the labour force survey
- smapling errors(small amounts of people that are surveyed)
- costs(£)
- inactive groups(early retired)
- underemployed(1 million ppl on zero hour contracts)
what is the percentage of 16-64 that are inactive
21.8%
what is structural unemplyment
immobility of labour due to long term change of structure of an industry
what are the reasons for occupational immobility
- technology advances( AI, amazon fresh)
- poor education system
- loss of comparative advantage( country less competitive)
what 3 components make up monetary policy
- exchange rate
- money supply(QE)
- interest rates
what are the aims of an expansionary demand side policy
- boost AD
- reduce unemployment
- increase inflation
what are the aims of a contractionary demand side policy
- reduce inflation
- improve Gov. finances
- reduce debt, promote saving
what happened during the Lizz Truss takeover
- broke the bond market(bond yield went up)
what is the Ricardian Equivalence
when the income tax cut is saved rather than spent, in preparation for future tax rises
what is the difference between interventionist and market based approach
- interventionist = more gov. intervention
- market based = reduces role of gov.
what is the crowding out effect
when increased government borrowing leads to HIGHER interest rates for businesses and the whole economy(govt. is competing for funds)
what are the components of the financial account
- reserves(gold, foreign currency)
- speculatory
- FDI
what are consequences of a current account deficit
- Exchange rate weakening(increased supply of currency)
- Trade deficit(lower AD)
- loss of investment confidence(increased borrowing)
what is the full definition of development(Sen)
- process of improving well being and quality of life
- through:
- improvements in living standards
- reduction in poverty
- access to education and healthcare
what is the definition of sustainable development
- meeting the needs of current generations without compromising ability for fututre generation to meet their needs
why is GNI better than GDP
- it includes remittance and incomes earned from abroad
what are the 3 components of HDI
- education
- healthcare
- incomes
what is the technique to write development essays
- development factor
- development indicator
- refer to development definition(Sen)
what is the definition for hot money
investor savings that chase the best interest rate internationally
what are the factors that can affect the exchange rate
- high import demand
- low interest rates/QE
- speculations/pessimism(brexit/lizz truss 2022)
- outward direct investment(increased S of pounds)
what does the term capital flight mean
- money leaves a country because of a lack of confidence
how much did the pound depreciate by during the brexit referendum
depreciated by 15%
what are some evaluation points for exchange rates
- incomes abroad/home
- marshall lerner condition
- inflation
why isnt dpreciation of pound effective in the SR according to the marshall lerner/J curve
firms are not able to buy UK exports until contracts end
