Economic Objectives Flashcards
Main objectives of uk economy
Economic growth Stable prices Low unemployment Balance of payments Fairer distribution of income
Economic growth causes?
More economic activity
How is economic activity measured
By GDP
Price increases and stable prices measured by
Inflation rate
Governments aim for inflation
2%
What is considered full employment
4%
Why is economic growth desirable
Higher employment
Higher disposable income
Better quality of life
Why economic growth can be bad
Lead to inflation
Greater inequality
Less opportunities available
Determinants of C
RDI Wealth Consumer confidence Age structure of population Inflation Rate of interest
What does a fall in interest rates cause
Rise in consumer expenditure:
Borrowing is cheaper
Reduced incentive to save
Reduced mortgage repayments
Determinants of I
RDI Rate of interest Business confidence Technology Taxes/regulations
Determinants of G
Economic activity level
Politics- austerity
Emergencies
Determinants of X and M
RDI abroad
RDI at home
Domestic price level
Exchange rate
What is on the Y axis of AD curve
Price level
What is on the X axis of AD curve
Real GDP
what is economic structure
describes the changing balance of output, trade, incomes and unemployment
3 types of industry
primary- extracting
secondary- manufacture
tertiary- selling
equation for AD
AD=C+I+G+(X-M)
what is consumer spending
spending by households on goods and services
what is investment
money spent on assets with the intention of increasing future profits
what is government expenditure
spending by government on state provided goods and services- schools, hospitals
subsidies
money granted by the state to keep prices low
demand
the quantity of a good or service that people are willing and able to buy at a certain price
disposable income
spending after tax
real income
spending after removing distorting effects of inflation
Average propensity to consume
the proportion of disposable income spent
wealth
stock of assets
