Macro 3 Flashcards

1
Q

What are capital goods

A

goods used to make consumer goods

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2
Q

What are consumer goods

A

goods and services which satisfy the needs and wants of consumers

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3
Q

What is aggregate demand

A

The totals of all demands and expenditures in an economy at any given price in a given periods of time

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4
Q

What is national expenditure a measure of

A

national income

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5
Q

How is national expenditure measured

A

GDP

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6
Q

What are the four components national expenditure is made up of

A

Consumption
Government spending
Investment
Exports-Imports

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7
Q

What is on the y-axis on the AD curve

A

price level

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8
Q

What is price level

A

the average level of prices in an economy

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9
Q

How is price level measured

A

CPI - consumer price index

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10
Q

What is the x-axis on the AD curve

A

real gdp

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10
Q

What is the shape of the demand curve

A

Downward sloping

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10
Q

What does the shape of the AD curve show

A

As prices rise, the spending power of households fall

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10
Q

What is the equation for aggregate demand

A

C+I+G+(E-I)

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10
Q

What is the wealth effect

A

If the price level falls, the purchasing power of wealth increases, so consumers will demand more. Firms will invest more as investment products are cheaper

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10
Q

What is the interest rate effect

A

When price levels are low, interest rates tend to be low - this encourages investment and consumer spending

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10
Q

International trade effect

A

As the price level falls, exports become cheaper so exports increase. Imports become more expensive. Net exports improve

10
Q

Income effect

A

As disposable income increases, consumption increases

10
Q

Consumer confidence effect

A

When consumers feel more confident in the economy, they will spend more and save less

10
Q

Tax effect

A

Increases in direct tax leads to a fall in consumers disposable income

10
Q

Unemployment effect

A

When unemployment rises, consumers will spend less and save more

11
Q

aggregate supply

A

The total output of producers of an economy at a given price at a given period of time

12
Q

what does the aggregate supply curve show

A

the relationship between price and output in an economy as a whole

13
Q

what are the determinants of SRAS

A
  • Cost of production
  • Price of related goods
  • Subsidies
14
Q
A