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Econ the 3rd > Introduction to Macroeconomics > Flashcards

Introduction to Macroeconomics Flashcards

1
Q

What is the circular flow of income

A

The idea that all money is passed between business and households

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2
Q

What are the 3 methods of measuring the size of the economy

A

Expenditure method
Income method
Output method

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3
Q

What is AD

A

Aggregate demand is the total value of all the goods and services demanded in an economy

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4
Q

What are the components of AD

A

C - Consumption
I - Investment
G - Government spending
(X - M) - (Exports - imports)

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5
Q

What are the 3 leakages

A

Taxation
Saving
Imports

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6
Q

What are the 3 injections

A

Consumption
Investment
Government spending

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7
Q

What is consumer confidence

A

How consumer view the state of the economy

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8
Q

Marginal propensity to consume

A

The % of a change in income that is spent

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9
Q

What is used to describe national output

A

AS

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10
Q

Why is it not necessarily a good thing that the economy is in equilibrium

A

Equilibrium can occur at a point where the factors of production are under-utilised

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11
Q

What is the accelerator theory

A

An increase in real GDP will lead to a proportionally higher increase in private sector investment

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12
Q

What is the multiplier effect

A

When an initial change in AD has a greater final effect on the level of equilibrium national income

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13
Q

What does the size of the multiplier depend on

A

The level of leakages from the system

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14
Q

What causes the multiplier

A

Due to the circular distribution of income money is spent multiple times

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15
Q

What is a likely effect of a POG

A

High inflation
Damage to the factors of production

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16
Q

What is the effect of a NOG

A

AD is smaller than it could be

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17
Q

Nominal value

A

Value based only on current value without taking into account how prices change over time

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18
Q

Real value

A

Value of an economic variable taking into account how the price changes through time

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19
Q

GNI

A

gross national income - GDP plus income from abroad

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20
Q

Seasonal adjustment

A

A process by which seasonal fluctuations in a variable are removed to reveal an underlying trend

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21
Q

Productivity

A

The measure of efficiency of a factor of production

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22
Q

Total factor productivity

A

The average productivity of all factors - total output over total input

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23
Q

Human capital

A

The stock of skills that contribute to the efficiency of a worker

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24
Q

Economic cycle

A

A phenomenon by which GDP fluctuates around an underlying trend

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25
Q

What is the equation for the price index

A

(Nominal GDP / real GDP) * 100

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26
Q

Index

A

A way of comparing the value of a variable with a base observation

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27
Q

CPI

A

Consumer price index - A measure of general prices in the UK

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28
Q

CPIH

A

CPI accounting for house prices

29
Q

RPI

A

Retail price index

30
Q

Deflation

A

A fall in price level

31
Q

Disinflation

A

A fall in the rate of inflation

32
Q

Hyperinflation

A

Extreme level of inflation

33
Q

Cost push inflation

A

Inflation caused by an increase in firms costs

34
Q

Demand-pull inflation

A

Inflation caused by an increase in AD

35
Q

Money stock

A

The amount of money in the economy

36
Q

Consequences of higher inflation

A

Increased inequality
Falling real income
Inefficient allocation of resources
Wage inflation - increased costs due to workers asking for more money
Uncertainty
Menu costs - firms must update prices more regularly

37
Q

Advantages of inflation

A

The value of governments debt decreases
Allows for economic growth

38
Q

Disadvantages of inflation

A

Causes uncertainty, increasing costs and fiscal drag

39
Q

Fiscal drag

A

When high inflation causes people to move up tax brackets reducing RDI

40
Q

Employment

A

People who are working

41
Q

Economically inactive

A

People who are of working age and are unable to work

42
Q

Discouraged workers

A

People who are have been unable to find work and are no longer looking for work

43
Q

Workforce

A

People who are economically active

44
Q

Unemployed

A

People who are economically active but not employed

45
Q

Full employment

A

A situation in which everyone who is willing and able to find work is able to do so

46
Q

Claimant count of unemployment

A

The number of people on JSA

47
Q

JSA

A

Job-seekers allowance

48
Q

ILO

A

Measure of how many people are without jobs but are willing and able to work

49
Q

Frictional unemployment

A

People who are between jobs

50
Q

Structural unemployment

A

Unemployment due to changes in the economic structure

51
Q

Cyclical unemployment

A

Unemployment that arises due to changes in the economic cycle

52
Q

Seasonal unemployment

A

Unemployment that arises during seasons when demand is low

53
Q

Real wage inflexibility

A

A situation in which minimum wage is higher than the equilibrium wage resulting in excess supply of labour

54
Q

Voluntary unemployment

A

A situation in which an individual chooses not to work

55
Q

What are the causes of frictional unemployment

A

Will always exist due to the nature of job searching

56
Q

What causes Structural unemployment

A

Difficulties learning new skills
Difficulty moving regions to find work
Changes in economic structure

57
Q

What causes demand deficient unemployment

A

When the supply of people wanting to work is higher than the demand for workers
Often happens when the economy is below full capacity

58
Q

What causes seasonal unemployment

A

Lack of demand during certain seasons e.g. January

59
Q

What causes wage inflexibility

A

When wages are pushed above the equilibrium often due to a rise in minium wage

60
Q

Advantages of low unemployment

A

Means that the long term unemployed decrease—increase in labour FOP
Multiplier effect

61
Q

Disadvantages of unemployment

A

Causes an increase in inflationary pressure
Decreases size of labour force

62
Q

balance of payments

A

A set of accounts showing how transactions are split between residents and other countries

63
Q

Current account

A

Identifies transactions that dont have return

64
Q

Financial account

A

account identifying transactions in financial assets between a country and the rest of the world

65
Q

Capital account

A

Identifies transactions in physical capital

66
Q

Credit

A

Money flowing into a country from a transaction

67
Q

Debit

A

Money leaving the account from a transaction

68
Q

Underemployment

A

Working fewer hours than you would like

Econ the 3rd (12 decks)

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