Macro 1.7 Flashcards
What is national capital stock?
The stock of capital goods that has accumulated in the economy and is measured at a point in time
What is wealth?
The stock of assets which have a value at a point in time
What is national wealth?
The stock of all goods that exist at a point in time that have value in the economy
What is national income?
The flow of new output produced by the economy in a particular period
What is national output?
The same as national income
What is national product?
Another name for national income and national output
What is consumption?
Total planned spending by households on consumer goods and services produced within the economy
What is a closed economy?
An economy with no international trade
What are the determents of saving?
Income, Wealth, Consumer confidence, expected income, expected wealth, current debt
What is saving?
Income which is not spent
What is a withdrawal?
A leakage of spending power out of the circular flow of income into saving, taxation or imports
What is investment?
Total planned spending by firms on capital goods produced within the economy
What is an injection?
Spending entering the circular flow of income as a result of investment, government spending and exports
What is an open economy?
An economy open to international trade
What is gross national income (GNI)?
A measurement of a country’s income including all income earned by country’s residents and firms regardless of where it’s produced
What is reflationary policies?
Policies that increase aggregate demand with the intention of increasing real output and employment
What is equilibrium national income?
The level of real output at which aggregate demand equals aggregate supply.
What is the calculation for aggregate demand (AD)?
AD = Consumption (C) + Investment (I) + Government spending (G) + (Exports (X) - Imports (M))
AD = C + I + G + X - M
What is aggregate demand (AD)?
The total planned spending on real output produced within the economy
What is aggregate supply (AS)?
The level of real national output that producers are prepared to supply at different average price levels
What is a shrinking circular flow?
When withdrawal is greater than injection
What is a growing circular flow?
When injection is greater than withdrawal
What is the rate of interest?
The reward for lending savings to somebody else and the cost of borrowing
What is the availability of credits?
The funds available for households and firms to borrow
When does a credit crunch occur?
It occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to obtain financing, and leads to a rise in the cost of borrowing
What is the distribution of income?
The spread of different incomes among individuals and different income groups in the economy
What is the wealth effect?
It examines how a change in personal wealth influences consumer spending and economic growth
What is aggregate consumption?
The spending by all households in the economy on consumer goods and services
What is the marginal propensity to consume (MPC)?
The change in consumer spending arising from a change in disposable income
How do you calculate MPC?
Change in consumption / Change in income
What is an accelerator?
A change in the levels of investment in new capital goods induced by a change in growth rate of national income or aggregate demand
What is the marginal propensity to save (MPS)?
The amount of extra income that is saved
What is the marginal propensity to import (MPM)?
The amount of extra income that is spent on import?
What is the marginal propensity to tax (MPT)?
The amount of extra income that is spent in taxation.
What is a multiplier?
The relationship between a change in aggregate demand and the resulting usually larger change in national income
How do you calculate the multiplier?
change in national income / initial change in government spending
What is short-run aggregate supply (SRAS)?
Aggregate supply when the level of capital is fixed
What is long-run aggregate supply (LRAS)?
Aggregate supply when the economy is producing at its production potential
What is investment in real life?
A situation when people invest in shares, bonds, properties or antiques
What is a trade surplus?
When exports (X) > imports (M) leading to an increase in aggregate demand
What is a trade deficit?
When imports (M) > exports (X) leading to a fall in aggregate demand
What does productivity measure?
The efficiency of the production process
How do you calculate output?
Factors input + Factor productivity
