Macro Flashcards
What are the main macro economic objectives?
- Stable economics growth
- Low inflation
- Low unemployment
- Stable balance of payments of a nation
Extra: Fair distribution of income
What are the non macro economic objectives
- Gender Equality
- Food security
- Energy security
UK macroeconomic policy?
- Improvements in productivity
- Rising living standards + fall in relative poverty
- Sound government finances
Inflation definition
A sustained general increase in prices + fall in the purchasing value of money (calculated in CPI)
Interest rates definition?
Cost of borrowing and reward for saving
What’s Unemployment
When someone between the ages of 16-64 is actively searching for a job
4 types of unemployment?
Cyclical ( economic cycle), Frictional (voluntary), seasonal (e.g strawberry pickers) + Real wage ( can’t afford to employ people)
Cost-push inflation?
Caused by increases in the cost of important goods / services where no suitable alternative is available
Demand-pull inflation?
When aggregate demand in an economy is more then aggregate supple
Exchange rates?
The value of one currency for the purpose of conversion to another
Appreciation
An increase in external value of one currency in relation to another
Depreciation
Reduces the real purchasing power of consumers in the economy affected
Multipler effect
The number of times a rise in national income exceeds the rise in injections of demand that’s caused
Percentage change
Change / original x 100
Index Number calculation
New variable / Base variable x 100
Removing inflation
Nominal variable / new price index x Base price index
AD definition
Total value for all goods and services produced in an economy in a given period of time
Components of AD
Consumption, Investment, gov spending, net exports
Macro short run AS
Spare capacity - mass unemployment
Macro Long run AS
Productive potential of the economy increases ( full employment)
AS definition
Total supply of goods + services available to a particular market from producers
Keynesian theory
Gov should intervene + invest to boost growth. Consumer demand driving force of economy
Economic growth
An increase in the quantity of goods + services that businesses produce in a given period of time
GDP
Measures the monetary value of final goods + service produced in a country in a given period of time
What are 3 leakages
Savings, imports + taxation
What are 3 injections?
Government spending, exports + investment
AD equation
AD = C + I + G + ( X - M )
Share of each component of AD
Consumption - 60%
Investment - 14%
Gov spending - 25%
Exports - imports - 1%
