macro economics EXAM REVISION Flashcards
GDP
This is the total value of goods and services that a country produces throughout a year
Economic Growth
increase in the production of goods and services compared to previous periods in time of the economy
Economic Cycle
this shows the stages of economic growth that an economy is in , this can be from booms to slumps
Recession
negative economic growth in an economy over 2 consecutive quarters(6months)
Unemployement
people are willing and able to work but cannot find a job
Claimant Count
records the number of people claiming unemployement related benefits
Inflation
the increase in the average prices
Balance of Payements
this is a record of a country’s transactions with the rest of the world (exports and imports)
Balance of trade Deficit
imports > exports
Balance of trade Surplus
exports > imports
The Circular Flow of Income
shows how money moves from producers to households and vice versa
Withdrawal
Money leaving the economy(savings , taxes and imports)
Injection
Money entering the economy (government spending , exports and investment)
Aggregate Demand
the total demand for goods and services in an economy at a given time and price levels
Aggregate Supply
the total amount of goods and services produced in an Economy at a given time and price levels
what is the equation for AD
C + I + G (X - M)
what are factors that affect consumer spending
Interest rates
consumer confidence
MPC and MPS
what are factors that affect investment
rate of economic growth
confidence of consumers
demand for exports
interest rates
influence of government regulations
what are the two movement along a curve called
contraction and expansion
what is the wealth effect
when the asset prices rise so the consumers feel wealthier so their confidence rises
what are factors which affect the SRAS to shift
wages , taxes , labour productivity , cost of raw materials
what does the horizontal line show on the LRAS
this shows spare capacity in the economy and that resources are not being used to reach output potential
what does the vertical line show on the LRAS
this shows that the economy is at full employement therefore there is no spare capacity so prices rise
what is excess supply
when the prices are above equilibrium
why would AS shift in an equilibrium
increase in productivity , this lowers the average price level and increases RNO
why would AD shift in an equilibrium
firms have les confidence in a recession so prices and RNO falls
what is the multiplier effect
when an initial input into the economy(government spending) causes a larger output rate (GDP)
what are the 4 macroeconomic objectives
sustainable Economic growth
Low unemployment
low and stable inflation
keeping balance of payments in equilibrium
what is inflation
the general increase of prices in the economy which erodes the purchasing power of money
what are the causes of demand pull inflation
reduced taxation
lower interest rates
general rise in consumer spending
a weak exchange rate
causes of cost(of production) push inflation
wage increase
high price of raw materials
higher taxes
higher import prices(weak exchange rate)
what is frictional unemployment
this is the period of time that people are unemployed because they are moving jobs
what is structural unemployment
changes in technology which leads to a loss of jobs
what is cyclical/demand deficient unemployment
this is when there is a general decrease in the demand of goods in the country due to a decrease in consumer confidence
what is regional unemployment
when there is a lack of job in an area due to business closure. the cause of this is mainly industrialisation
what are the disadvantages of migration
supply of labour is increased therefore the price equilibrium of labour is reduced
what are the characteristics of a recession
high unemployement
low confidence
low consumer spending
low inflation
what are the characteristics of a boom
gdp is high
low unemployement
rise in inflation(demand)
confidence is high
what is the PPF
a graph which shows all the possible combinations of the output of 2 goods using all available resources(CELL)
gross national income
income received by a country both domestically and from assets abroad
what is investment
money spent on capital goods in order to improve factors of production increasing productivity
what are the limitations of using GDP
differences in distribution in income across the country
population growth may account for the main reason to why GDP is high
doesnt account for environmental costs to achieve high production
what are evaluation points for limitations of GDP
other measures maybe better such as GDP per capita
standard of living may be difficult to measure by a figure an it is subjective
what are some determinants to investment
government policies
demand for exports
economic growth
