MACRO 2 Flashcards
What are the four factors of production?
Capital
Enterprise
Land
Labour
What are the four factor payments?
Capital - Interest
Enterprise - Profit
Land - Rent
Labour - Wage
What is an economic agent?
An individual or company that influences an economy by producing, selling or buying goods and services or investing money.
What are the household’s roles, aims and incentives?
Role - Provide FoP, Expenditure
Aims - Maximum utility
Incentives - Cost changes, income, utility
What are the firm’s roles, aims and incentives?
Role - Convert FoP into goods and services
Aims - Maximise profit
Incentives - price changes
What are the government’s roles, aims and incentives?
Role - Generate revenue and provide essential economic framework (redistribution of income)
Aims - Maximise social welfare and provide public goods
Incentives - Votes
What are the 3 methods of measuring GDP?
OUTPUT - Total value of all final goods and services produced within and economy
INCOME - Sum of all factor payments
EXPENDITURE - total expenditures
In theory, what type of value should all three methods produce?
The same value.
If the value from one of these methods has increased, what would we say the economy has experienced?
Economic growth.
What does real GDP take into account that nominal GDP doesn’t?
Inflation
What is Nominal National Income?
Total income of an economy.
What is the Real National Income
Total income of the economy adjusted for increases in prices (inflation).
What is GDP per capita?
The total output of the economy divided by the number of people within the economy.
What are the 3 withdrawals from the circular flow of income?
- Tax to the government
- Savings to the banks
- Imports to foreign trade
What are the 3 injections into the circular flow of income?
- Exports from foreign
trade - Investment from banks
- Government Spending
