Economics P1 Flashcards
what are the economic questions?
What, how, for whom
product market
businesses sell goods and services
foreign exchange market
businesses buy and sell currencies to pay for imported goods
Money market
borrowing and lending in the short term (SARB)
financial market
provides buyers and sellers the means to trade financial securities
capital market
Institutions trade financial securities in the long term (mortgage bonds) - JSE
Real flow
flow of goods, services and FOP
injections (money entering the circular flow)
J = I + G + X
(private investment + gov. expenditure + export income)
Leakages (money exiting the circular flow)
L = S + T + M
(savings, taxes, imports)
GDP formula
Y = C + I + G + (X - M)
private consumption + private investment + government spending + (exports – imports).
GNI
GDP + (money flowing from other countries - money flowing to other countries)
business cycle
fluctuations in the aggregate economic activity of a nation over a period of months/years
4 phases of the business cycle
- Recession:
Negative economic growth rate for 2 consecutive quarters
Income, sales, production, employment fall (vicious cycle) - Depression:
large scale unemployment and severe lack of goods and services, high inflation - Recovery
gradual increase in demand and supply - Boom
Positive economic growth rate for 2 quarters
Income, sales, production, employment rises (virtuous cycle)
standards of living improve
measuring the business cycle
GDP, inflation rate, employment growth rate
Business cycle indicators
- Leading indicators
JSE - Coincident indicators
Salaries/wages of workers
3.Lagging indicators
Unemployment rates
