Goods Markets Flashcards
What does GDP stand for?
Gross Domestic Product
What are the three methods of measuring GDP?
- The product method
- The income method
- The expenditure method
True or False: The three methods of measuring GDP always yield the same calculation.
True
What is the formula for aggregate demand (AD)?
AD = C + I + G + X - IM
Define ‘Consumption’ in the context of GDP.
Goods and services purchased by consumers
What does ‘I’ represent in the GDP equation?
Investment or fixed investment
What does ‘G’ denote in the GDP equation?
Government spending
What is ‘IM’ in the GDP equation?
Imports
What is ‘Z’ in the demand for goods equation?
Total demand for goods
Fill in the blank: The consumption function is represented by _______.
C = c0 + c1(Y - T)
What does c0 represent in the consumption function?
Autonomous consumption
What is the marginal propensity to consume denoted as?
c1
What is the equilibrium condition in the goods market?
Y = Z
How does an increase in government spending affect the economy?
It raises incomes and increases aggregate demand
What is the multiplier effect?
An increase in demand leads to a larger increase in production and income
What happens to income when government spending rises by £1,000,000?
Incomes rise by £1,000,000 initially
What is the limit of the total increase in production represented by?
1 / (1 - c1)
What is the significance of negative feedback loops in the Keynesian Cross model?
They help the model return to equilibrium
What can excessive demand lead to in an economy?
Hyperinflation
What is the Human Development Index (HDI)?
A measure combining life expectancy, access to education, and Gross National Income per capita
What is the Ecological Footprint used to measure?
How much nature we have and how much we use
What does the OECD Better Life Index allow individuals to do?
Create their own better life index based on personal factors
What are the critiques of GDP according to Robert F. Kennedy?
- Counts negative aspects like pollution
- Does not measure quality of life
- Ignores factors that make life worthwhile
True or False: There is a consensus on how to replace GDP.
False
