macro economic objectives / circular flow / AD Flashcards
what is macroecon?
macroecon is the study of the economy as a whole, for example the price level of the whole economy
what is the cetris paribus assumption?
“all other things remain constant”
what are the macroeconomic objectives ?
- economic growth
- stable inflation (2%)
- low unemployment
- balance of payments, equilibrium on current account
- balanced government budget
- greater income inequality
- protection of environment
what is GDP ?
gross domestic product and it is the value of all goods and services produced in an economy at a given time period
What is economic growth ?
an increase in the value of goods and services produced by an economy over a period of time (%change in GDP)
what is recession?
a fall in the value of goods and services produced by an economy over at least 6 months.
what is nominal GDP?
the monetary value of all goods and services produced in the economy over a given time. CURRENT MARKET VALUE
what is real GDP? and how do you calculate it ?
monitary GDP adjusted for inflation
calculation :
nominal GDP / Price index (100) X 100
what is inflation?
sustained general rise in prices across and economy. GOAL IS 2 %
what is the difference between deflation and disinflation?
disinflation is inflation less than the year before while deflation is a sustained general fall in prices across an economy
between what ages are people either, employed, unemployed, or economically inactive ?
16 - 64
what are exports ?
flows of money into a country through the selling of a good/service
what are imports ?
flows of money out of a country through buying a good/service from abroad
what is income inequality ?
a large distribution of income / difference in income between the rich top 10% and the poor lowest 10%
what is income?
the low of money measured over a period of time (£ per year)
what is wealth?
stock of assets measured at a point in time
what is the circular flow of income?
the flow of goods and services between households and firms and their corresponding payments in money terms
what is national income?
the value of all the output of an economy over a period of time
what are the injections into the circular flow?
Investment
goverment spending
exports
what are the withdrawals out of the circular flow ?
savings
taxation
imports
what are the three ways of measuring economic activity in the circular flow?
Y=O=E
national income = national output = national expenditure
- national income is the value of income paid by firms to households in return for factor inputs
- national output is the value of the flow of goods / services from firms to households
- national expenditure is the value of spending by households on goods and services
what is aggeragate demand?
ad is the total planned expentidture in an economy at a given price level. The components are : C+G+I+(X-M)
whats the definition of consumption?
spending by households on g/s in the domestic economy over a period of time.
what is saving?
money that is not spend out of disposible income
whats the difference between the average propensity to consume and the marginal propensity to consume?
APC = proportion of income spent on g/s = C/Yd
MPC = proportion of change in income spent on s/g = change in consumption / change in Yd
list factors which effect how much a household saves
- Yd
- confidence
- taxes
- level of debt
- interest rate
whats the difinition of interest rates ?
the price of money, cost of borrowing money
whats the wealth effect?
the change in consumption following a change in prices of assets
what is investment?
addition to the capital stock of the economy e.g. machines
