Macro Flashcards
What is aggregate demand?
C+I+G+(X-M)
AD is the total spending of goods and services within an economy over a given period of time.
What are the governments macro economic objectives?
Stable economic growth Reducing unemployment Favourable balance of payment on the current account Redistribution of income Low and stable inflation Favourable exchange rate
What is aggregate supply?
The total amount of good and services that producers are willing to supply at a certain price level over a period of time.
How do you shift AS?
Increase the availability of quality raw materials.
Efficiency to reduce production cost.
What is circular flow of income?
Movement of income between households and firms within an economy.
What are withdrawals/leakages?
When money leaves the economy. This can be caused by saving, tax or imports.
What is an injection?
It adds money to the economy. This can be done by investments, government spending and exports.
What is the multiplier?
A concept that explains how much national income increases when there is an increase in injection.
What is economic growth?
An increase in production of goods and services within an economy over a period of time.
What is short-run economic growth?
This happens by influence of AD and is the increase in out levels by using resources efficiently.
What is long-run economic growth?
This is influenced by AS and is the increase in productive capacity of the economy.
What are some benefits of economic growth?
Increase in disposable income Decrease in unemployment Increased standard of living Lower inflation rate Increase in life expectancy
What are some drawbacks of economic growth?
Increased population
Lower standard of living
Increase in imports
Increase in consumption of renewable resources
Social costs: stress and family breakdown
How do you increase AD?
Increase either I,G,C or (X-M)
What are the methods of measuring economic growth?
Output approach
Expenditure approach
Income approach
Explain output approach.
This is the total production within an economy over a certain period. However a drawback is that household production is excluded.
Explain the expenditure approach.
This is the total spending by economic agents over a certain period. However a drawback is that double counting may occur due to second hand purchase/ component parts to a final product- calculated from final product.
Explain the income approach.
This is the total earning within an economy over a period. However drawbacks are that not all income is declared, income from informal sector is excluded and transfer benefits are not included because they’re not earned from engaging in economic activity.
What are the 3 KPI’s?
Economic growth
Inflation
Unemployment rate
What is inflation?
The sustained increase in price levels within an economy over a given period of time.
What is international trade?
The exchange of products between countries.
What is gross domestic product per head?
The total output divided by the population within an economy over a given period of time.
What is fiscal policy?
The taxation and spending decisions of a government.
What is monetary policy?
Central bank/government decisions on the rate of interest, the supply of money and the exchange rate.
What is protectionism?
The protection of domestic industries from foreign competition.
What are the protectionism policies?
Tariffs Quotas Embargoes Red tape-time delay on imports Quality standards
What are the supply side policies?
Education and training Reduction in taxes National minimum wage Privatisation Reduction in trade union power Subsidies Deregulate the market Grants
