Macro Flashcards
Aggregate Demand
Is the total amount of spending on goods/services produced in an economy during a period of time
AD formula
AD = C + I + G + X – M
Wealth
Is the value of assets that people own e.g. houses, stocks and bonds, jewellery, works of art etc + not the same as income
Nominal GDP
Value of GDP that has not been adjusted for inflation + not a clear measure as it overstates the value
Real GDP
Value of GDP that has been adjusted for inflation/ takes it into account
Investment
Is an increase to the capital stock of the economy (i.e. factories, machines) used to produce other goods/services
For an economist, investment only occurs if real products are created e.g. buying new machinery
Economic growth
Increase in the productive capacity of the economy
Gross Domestic Product (GDP)
Value of goods/services produced by a country in a year OR total output of an economy
3 ways to measure GDP
1) Total value added produced by firms in the domestic economy during a period
2) Total expenditure in a period
3) Total amount of income earned
Calculated as an average of the 3 measures
Gross National Income (GNI)
Takes into account the income flows between countries
Some residents receive some income from abroad + some income earned in the domestic economy is sent abroad
Standard of Living
Quality of life that is enjoyed by the country’s residents
Inflation
Sustained rise in the general price level over time
Cost of living increases + purchasing power of money decreases
Deflation
When the average price level in the economy falls
-ve inflation rate
Disinflation
Falling rate of inflation + when average price level is still rising but to a slower rate
Consumer Price Index (CPI)
Survey is used to find out what consumers spend their income on
From this a weighted basket of goods is created
Measures average price change of these goods
Updated annually
In employment
Includes those who are employed by firms or other organisations (e.g. governments) + self-employed
Economically inactive
Includes students, retired, sick or looking after family members
Discouraged workers
People who have failed to find work + given up looking
Unemployment
Number of people who are looking for a job but cannot find one
Underemployed
People who are unable to work as many hours as they want to or are overqualified for their job e.g. a doctor working in McDonalds
Balance of Payments
Records all financial transactions of a country with other countries
States how much is spent on imports and what the value of exports is