Economic growth Flashcards
What is GDP?
The value of goods and service within an economy
What is GDP per capitia?
the sum of gross value added by all resident producers in the economy plus any product taxes
What is PPP?
PPP (Purchasing Power Parity) is a measure that compares different countries’ currencies by determining the relative price of a similar basket of goods and services in each nation.
What is GNI and what does it do?
Gross national income- is the total amount of money earned by a nation’s people and businesses.
What is inflation?
an increase in the general price level due to the increase in the money supply
What is deflation?
A fall in the general price level due to a decrease in the money supply
What is disinflation?
A reduction in the rate of inflation
What is CPI?
The Consumer Price Index (CPI) measures the monthly change in prices paid by consumers
What is RPI?
Measure of prices of goods and services, includes housing costs like mortgage interest and council tax
What is demand pull inflation?
A rise in the general price level when demand for goods and services exceeds supply in the economy
What is cost pull inflation?
Cost-push inflation, occurs when overall prices increase due to increases in the cost of wages and raw materials.
What are the different government policies?
Supply side-policies, demand side-policies, monetary policy, fiscal policy
What are the main government objectives?
T-Trade
I-Inflation (+/- 2%)
G-Growth
E- Employment
R-Redistribution of income
S-Sustainability
What are supply side policies
government strategies that focus on enhancing an economy’s ability to produce goods and services.( usually through intervention ie : education)
What are demand side policies
focused on increasing or decreasing aggregate demand to influence unemployment, real output, and the price level in the economy ( includes fiscal policies, tax etc..)
What is monetary policy?
a set of actions to control a nation’s overall money supply and achieve economic growth.
What is fiscal policy?
The use of government spending and taxation to influence the economy.
What are automatic stabilisers?
Automatic stabilisers are automatic fiscal changes as the economy moves through stages of the business cycle
What is the accelerator affect?
an increase in national income (GDP) results in a proportionately larger rise in capital investment spending.
What is the multiplier effect?
a phenomenon whereby a given change in a particular input, such as government spending, causes a larger change in an output, such as gross domestic product.
What is discretionary fiscal policy?
These are intentional government policies to increase or decrease spending or taxation
What is contractionary fiscal policy?
measures governments take to reduce their spending and increase taxes, leading to a decrease in economic growth
What is expansionary fiscal policy?
increasing spending or cutting taxes to prevent or end a recession or depression
What is quantitative easing?
Purchase of assets such as bonds in order to increase money supply
What is quantitative tightening?
To decrease liquidity within the economy, reducing money supply ( bond holdings BOE)
What is contractionary monetary policy?
the rate of monetary expansion by a central bank
What is expansionary fiscal policy?
a policy by monetary authorities to expand the money supply and boost economic activity by keeping interest rates low to encourage borrowing by companies, individuals and banks.
What is crowding out?
public sector spending drives down or even eliminates private sector spending
What is the formular for the multiplier effect?
1/(1-MPC)
Formula for MPS?
1/(1-MPC)=1/MPS
Formula for MPW?
1/MPW (MPS+MPT+MPM)
What would a reduction in GDP lead to?
Increased unemployment, reduction in government tax revenue , fall in living standards
=> Less demand so firms will reduce costs
=> Consumers working less/making less profit
=> Drop in demand for goods/services
What is potential economic growth?
the rate of growth that an economy can sustain over the medium term without generating excess inflation.
What is actual potential economic growth?
the yearly increase in real Gross Domestic Product (GDP), reflecting the economy’s performance over a short period
What are characteristics of a recession?
Inflation, unemployment, falling profits , increased budget defecit
What would cause an increase in the value of the multiplier effect?
- Increase in government spending, Increase MPC, Decrease MPS, Low tax rates, low import rates
What are 3 injections in the circular flow of income?
Investment , Government spending , Exports
What are 3 with-drawls circular flow of income?
Savings , Taxes and Imports
What is long-term GDP growth?
Sustained period of GDP growth
What is short-term GDP growth?
Short-term GDP growth is influenced by business cycles, policy changes, and temporary shocks (e.g., stimulus spending, recessions, supply chain disruptions). It fluctuates year to year.
Relationship between fiscal deficit and total national debt?
Fiscal deficits will increase national debt as government has to increase borrowing to increase debt
What are 3 automatic stabilisers?
tax cuts, government spending, subsidies
What is real national income?
the total value of goods and services produced in an economy in a given period of time. It is the same as nation output (GDP).
What is GNP?
Gross national product.Value of economic output
