Economic Factors Flashcards
What is macro economics?
The study and analysis of the behaviour of the whole economy
What is the economy?
The collective behaviour of a number of different groups such as businesses, people and employees and consumers and the government
What is the nature of economics?
- Comparing economy with itself 10 years ago is not like for like
- Effects of a policy in the past won’t necessary have the same effect
- Dynamic - changes over a period of time
What is economic activity?
The level of output in all sectors of the economy - primary secondary and tertiary
What is GDP?
The total value of all the economy’s output (measured quarterly or yearly)
Why does GDP rise?
Usually due to a rise in inflation but it is adjusted by deducting the rate of inflation to give a true GDP value
What happens when GDP rises?
Employment rises, jobs more secure, consumers more spending power, more demand for businesses
What is the circular flow of income?
The continuous flow of income from business to households as payments for work, and from households to businesses as payment for products
What are leakages?
Income that leaks away from the econonomy and so does not get passed back to UK firms from households, comprises taxes, savings and imports
Reasons why income does not go directly to UK firms…
- Tax
- Savings
- Imports
How does the government combat leakages?
- Gov spending - schools/hospitals
- Exports
- Investment - capital spending by businesses
What are injections?
Income coming into the UK economy that does not come from UK households, comprises investment, gov spending and exports
What are supply side policies?
- Training
- Performance related pay
- Cutting TU power
- Labour mobility
- Income tax, corporation tax
- Technology
- Privatisation
- Deregulation
What does an interest rate rise result in?
GPD down, inflation down
What does an interest rate fall result in?
GPD up, inflation up
