Macro Flashcards
GDP
Total market value of goods and services produced in aus in 1 financial year.
GDP=C I G (X-M
Consumption
Market value of all goods and services purchased by households, including durable products (cars, home computers and durable goods(food,clothing,petrol
-50% of GDP
-relatively stable
Investment
-purchases of capital goods such as machinery and equipment also includes new construction
-BUSINESS INVESTMENT- spending by firms on capital machinery etc.
-RESIDENTIAL- investment by households on houses apartments etc
-INVENTORIES- changes in inventory (stocks of unsold goods)
-20%
Gov expenditure
Current expenditure- gov spending on goods and services including salaries of gov employees
Capital expenditure- spending by gov on infastructure and other capital such as roads n hospitals
-25%
Net exports
-5%
Exports imports
Economic growth
Increase in real output of goods and services produced in a country overtime
Real output
Measure of output adjusted for inflation
Nominal output
Not adjusted for inflation
GDP is good
-consistent way to measure econ activity overtime
-easy to understand
-can compare growth rates across countries
-informs econ policy makers of countries income
GDP not a good measure because
-doesn’t measure value of voluntary work
-doesn’t capture improved quality of goods
-doesn’t measure well being
-doesn’t consider important factors - life expectancy health leisure time
Benefits of econ growth
-higher real income and material welfare
-greater employment/business opportunities
-fiscal dividend - greater overhead capital
Costs of econ growth
-income inequality increases
-depleted resources
-economic problems for future generations
Potential GDP
Maximum gdp a country is capable of producing with perfectly efficient use of resources - 3ps
Actual GDP
Current production of economy
APF - aggregate production function
Shows how productivity of workers depends on the quantity of physical capital per worker, their human capital and the states of technology
