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Economics > Macro- Economics year 1 > Flashcards

Macro- Economics year 1 Flashcards

1
Q

Aggregate Demand

A

The value of total demand for final goods and services in an economy at a given time (C+I+G+(x-m))

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2
Q

Aggregate supply

A

The value of the total supply of final goods and services in an economy at a given time

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3
Q

Average propensity to consume

A

The percentage of total income that households spend on domestic goods and services

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4
Q

Average propensity to import

A

The percentage of total income that households spend on import

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5
Q

Average propensity to save (savings ratio)

A

The percentage of total income that households spend on saving

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6
Q

Average propensity to tax

A

The percentage of total income that households pay in tax

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7
Q

Black markets

A

Unofficial and unrecorded, often illegal, trading that is not counted when estimates of size of aggregate demand and aggregate supply are made

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8
Q

Capital accumulation

A

Investment that increases the total stock of capital in an economy

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9
Q

Capital consumption

A

A reduction in the total stock of capital in the economy

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10
Q

capital expenditure

A

Money spent by the government on adding to the capital stock

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11
Q

Capital stock

A

The total value of productive machinery and tools used in production in an economy

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12
Q

Capital output ratio

A

The relative size of the amount of capital stock that is needed in order to create the desired level of output

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13
Q

Circular flow of income

A

The total amount of money revolving around an economy in a period of time

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14
Q

Classical aggregate supply

A

In the short run the AS curve is upward sloping and in the long run its vertical

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15
Q

Consumption

A

The total amount of money spent by consumers on UK goods and services

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16
Q

Current government expenditure

A

Money spent by the government on the day to day running of the government. It includes things like welfare benefits and repairs to infrastructure

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17
Q

Depreciation (investment)

A

The reduction in value of an asset over a period of time

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18
Q

Discretionary expenditure

A

Money spent by the government over which it has a choice and it is easy to change how much it spends

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19
Q

Disposable income

A

Consumer income remains after deduction of taxes and social security charges, available to be spent or saved as the consumer chooses

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20
Q

Exchange rates

A

A price or rate at which one currency is changed for another. It tells you foreign money you can buy with £1.

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21
Q

Exports

A

UK Goods and services sold abroad

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22
Q

Financial transactions

A

spending by the government on buying shares in failed banks, lending money to businesses and lending money to other countries

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23
Q

Fixed capital formation

A

The process of a firm increasing its stock of assets used in the productive process. It means the same thing as capital accumulation but just for an individual firm

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24
Q

Full capacity

A

The maximum output possible in an economy with all available resources being used in their most efficient uses

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25
Q

Government spending

A

Goods and services bought by the government that are paid for through taxes and borrowing.

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26
Q

Keynesian aggregate supply

A

In the short run AS is horizontal and in the long run AS is vertical

27
Q

Life cycle hypothesis of consumption

A

A theory developed by Franco Modigliani in 1957. It states that individuals seek to smooth consumption over the course of a lifetime. - borrowing in times of low income and saving during period of high income

28
Q

LRAS

A

long run aggregate supply, this is the full capacity of the family

29
Q

Macro economic equilibrium condition

A

where total injections into the circular flow of income are equal to the total withdrawals from it so that there is no incentive for GDP to change

30
Q

Mandatory government expenditure

A

Money spent by the government by law e.g benefits

31
Q

Injections

A

Money added to the circular flow of income, which increases AD

32
Q

Marginal efficiency of capital

A

The expected rate of return on money spent on an investment

33
Q

Marginal propensity to consume

A

The proportion of an extra amount of income that is spent on domestic consumption goods

34
Q

Marginal propensity to tax

A

The proportion of an extra amount of income that is taxed and so is taken out of the circular flow of income.

35
Q

Marginal propensity to withdraw

A

The proportion of an extra amount of income that is not spent and so s taken out of the circular flow of income

36
Q

Money wages

A

The nominal value of wages paid to employees that form part of the costs of a business

37
Q

Permanent income hypothesis of consumption

A

The idea that people spend money at a level consistent with their expected long term average income, so that even if this means that they have to borrow now they expect to be able to afford it later

38
Q

Productivity

A

output per worker per period of time

39
Q

Real wages

A

The nominal value wages paid to employees, that form pat of the costs of a business, reduced to take into account the effects of changes in prices

40
Q

Real values

A

Items valued in money terms that have had their value reduced to reflect changes in pries over time

41
Q

Saving

A

The act of putting money somewhere safe to keep for a future date

42
Q

Savings

A

The stock of money that has been saved for a future date

43
Q

SRAS

A

short run aggregate supply

44
Q

The accelerator effect

A

where an increase in national income (GDP) results in a proportionally larger rise in the capital stock

45
Q

Sticky wages

A

A situation where wages do not respond to changes in the supply and demand for labour. It is most often associated with wages not falling in a recession in order to clear unemployment.

46
Q

The multiplier effect

A

where an increase in injection into there circular flow of income results in a proportionally larger rise in GDP

47
Q

The wealth effect

A

where an increase in the value of an asset that you own makes you think you are richer so that you spend more money

48
Q

Transfers/Transfer payments

A

A payment made or income received in which no goods or services are being paid for, such as welfare benefit payment or subsidy.

49
Q

Withdrawals

A

Money taken out of the circular flow of income, which decreases aggregate demand

50
Q

Economic activity

A

the amount of buying and selling that takes place in a period of time

51
Q

Economic growth

A

The percentage change in the level of business activity ie the percentage change in GDP

52
Q

Economic indicators

A

The measures that are used to judge the performance of an economy. These include inflation, unemployment, economic growth, balance of payments, the budget balance and the degree of equality

53
Q

Economic performance

A

A judgement about how well the economy is doing referring to the economic indicators.

54
Q

Employment

A

The number of people that are recorded as being working

55
Q

GDP

A

Gross domestic product. This is the value of all good and service produced within an economy (for domestic consumption) excluding net investment income from abroad

56
Q

GDP per capita

A

The per person value of all goods and services produced within the economy for domestic consumption excluding net investment from abroad.

57
Q

General price level

A

A measure of the overall level of prices in an economy. It is calculated for a specific set of goods and services (the average consumer basket)

58
Q

Government economic objectives

A

Economic targets set by the government for the main economic indicators.

59
Q

Index numbers

A

A way of representing complex or large numbers so that they can be more easily read

60
Q

Inflation

A

A persistent rise in the general level of prices. For example with an inflation rate of 10% something worth £100 would now cost £110 the next year and so on.

61
Q

Nominal income

A

The value of a person’s or economy’s income before price changes are taken into acount

62
Q

The balance of payments

A

The difference between all flows of money into a country (exports) and all flows of money out of a country (imports). It affects the aggregate demand and the size of the circular flow of income

63
Q

Unemployment

A

The number of people who do not have a job but who want one.

Economics (6 decks)

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