Macro 1 Flashcards
Boom
Rapid gdp growth ahead of trend
Slowdown
Deceleration of growth
Recession
Negative growth over two quarters caused by animal spirits, policy decision, collapse of housing market
Depression
Fall in GDP by 10% over 2 years
GDP
Total value of national output (goods/services)
Economically inactive
Of working age, not actively looking for work
Productivity
Measure of efficiency of factors of production
Land, Labour, Capital
Basic circular flow
Flow of income and spending between households and firms
Disposable income
Yd
Consumption - savings
average propensity to save
Savings / disposable income
Marginal propensity to save
Change in spending/ change in disposable income
Real investment
Spending on capital goods
Index
(Value/ base value) x 100
Scaled number to represent a larger value
Consumer price index
Cost of living.
Total (Weight X Price index) total weights added
Real GDP
Nominal GDP X 100/CPI
GNI
GDP + Net investment income from overseas assets
E.g. Burberry profits back to U.K.
Multiplier effect
Final change in GDP/ initial change in AD
1/marginal rate of leakage
Recovery
Economy starts to expand again
Stagnation
Little to no economic growth. 2% or lower
High unemployment and involuntary part time employment
Stagflation ?
Stagnation with inflation
Characteristics of a boom?
High employment Wage inflation Consumer confidence strong Low interest rates Positive output gaps
Characteristics of a recession?
Higher unemployment Contraction of GDP Low consumer sentiment High interest rates Lower output gaps
Output gap? Yes
Difference between actual and potential GDP.
Check where real GDP is compared to where it should be according to LRAS
