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H2 Economics > General Macroeconomics > Flashcards

General Macroeconomics Flashcards

1
Q

Marshall Learner Condition

A

Currency deprivation only corrects a current account deficit if:
PEDx + PEdm > 1
(Sum of price elasticity of X & M > 1)

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2
Q

Current account componenets

A

Goods, services, income and current transfers

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3
Q

Macro goals

A

TIGERS:
Trade
Inflation
Growth
Employment
Redistribution of income
Stability

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4
Q

Fiscal policy

A

Changes in government spending & taxation in order to influence AD

  • Reduces DD deficient unemployment (expansionary)
  • Reduces budget deficit/government debt (contractionary)
  • Shifts AD only
  • Causes DD pull inflation, trade deficit
  • Crowding out effect
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5
Q

Monetary policy

A

Changes to IR, the money supply (and by extension the exchange rate) by the central bank in order to influence AD

  • Affects inflation more effectively
  • Prevent credit bubbles (contractionary)
  • Reduces BOT deficit (contractionary)
  • Shifts AD only
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6
Q

Supply side policy

A

Increasing education, infrastructure or foreign workers
Reduce taxes, labour market reforms and policies to promote competition

  • Aims to increase productive capacity (AS)
  • Long gestation period
  • No guarantee for success
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7
Q

Crowding out effect

A

Excess government spending leads to government borrowing all the loanable funds. As supply of loanable funds fall, interest rates increases, firms cannot invest and are crowded out.

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8
Q

Credit bubble

A

Credit bubbles involve a sudden surge in consumer or business loans, debt instruments, and other forms of credit. (Excessive borrowing)

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9
Q

Wage price spiral

A
  • DD pull inflation
  • Consumers purchasing power falls
  • Unions push for higher wages
  • Cost push inflation
  • Fall in national output
  • Government implements policy to increase AD; GPL increases
  • 2nd round of wage push by unions
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10
Q

Disinflation

A

Positive but declining inflation

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11
Q

Mild inflation

A

0-3%

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12
Q

Moderate inflation

A

4-10%

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13
Q

Galloping inflation

A

> 10%

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14
Q

Hyper inflation

A

> 50%

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15
Q

Imported inflation

A

Increase in prices of imported key factors of production

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16
Q

Demand pull inflation

A

Increase in AD while economy is operating near or at Yf

17
Q

Δ Real GDP per capita

A

ΔGDP - Δ Population - Δ Inflation

18
Q

Purchasing Price Parity

A
  • A measure of the price of specific goods in different countries
  • Used to compare the absolute purchasing power of the countries’ currencies
19
Q

Injections

A

Loans from banks, government expenditure and export revenue

always towards firms

20
Q

Withdrawals

A

Net savings to banks, taxes to governments and import expenditure

always from households

21
Q

Sustainable growth

A

AG + PG without decrease the ability of future generations to meet their needs and wants

22
Q

Hysteresis effect

A

Loss of skills due to prolonged unemployment will lead to further unemployment (impacts size of labour force)

23
Q

Ways to measure level of education

A
  1. PISA score
  2. Literacy rate
  3. Mean years in schooling
  4. Number of universities
24
Q

Ways to measure level of healthcare

A
  1. Life expectancy
  2. Infant mortality rate
  3. Ambulance response time
  4. Bed occupancy ratio
  5. Median hospital wait time
25
Q

Consumer Price Index

A

Weighted average price of basket of consumer goods

26
Q

SOL calculation/measurement problems

A

SOL understated since:
1. Non-market activities
2. Underground activities
are unaccounted for

27
Q

SOL comparison/interpretation problems

A

SOL overstated due to
1. Inequity
2. Externalities
3. Trade off with leisure time

28
Q

Common macro policy evaluations

A
  1. Difference in relative significance of C, I & G in AD
  2. Size of multiplier
  3. Expectation (future state of economy)
  4. Current state of economy (Is economy at Yf?)
  5. Government budget position (crowding out effect)
29
Q

Trade dependency ratio

A

(X+M) / GDP

30
Q

Beggar thy neighbour policies

A

policies that a country enacts to address its economic woes that, in turn, actually worsen the economic problems of other countries

31
Q

How to choose R1&2

A
  1. Internal vs External
  2. DD vs SS
  3. Context
  4. Example
  5. Area available for analysis (eg diagram)
32
Q

Elements of a topic sentence

A
  1. Signposting
  2. Clearly indicate scope
  3. Location/Country
  4. Clearly state point & economic framework
  5. Contextualise
33
Q

Policies that affect both X&M

A
  1. Currency appreciation/depreciation
  2. Change in CA
  3. Inflation
  4. Change in quantity and quality of G&S
  5. Rate of growth
  6. Unfair trade practices
34
Q
A

H2 Economics (5 decks)

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