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
Capital deepening
Physical capital per worker
Real gdp formula
Nominal/CPI x 100
Percentage change formula
New-old/oldx100
Leakages
Savings, tax, imports
Injections
Investment, gov spending, exports
Equilibrium
When leakages equal injections. When equilibrium, no tendency for income to change, macro-economic system is in balance
S+T+M=I+G+X
