Macro Final week Flashcards
What is gross investment?
Total investment on new capital goods
What is net investment?
Gross investment minus capital consumption (eg the depreciation
What are the factors influencing SRAS?
costs of raw materials amd energy, changes in exchange rates, changes in tax rates
What is a negative output gap?
Actual growth is less than potential growth
What is a positive output gap?
Behyond the PPF - potential > actual
What is the education measure of HDI?
Mean years of schooling of adults 25 plus and expoed years of schooling if current five year olds
What is the health measure of HDI?
Life expectancy at birth
What is the income measure of the HDI?
Real GNI per capita adjusted for PPP
Name some other indicators for measuring development
Inequality adjusted HDI, Multidimensional poverty index, genuine progress indicator
What is a liquidity trap
Low Nominal interest rates have little effect on demand because of low confidence in the financial system
What effect has QE had on income inequality.
Widening income inequality, prop up of stock markets only benefits owners of assets in the higher income groups
What does an exchange rate depreciation lead to?
Higher inflation (cost push inflationary pressure)
Reduction in trade deficit
Rise in exports fall in imports increased in AD increase in employment
Costs of being internationally competitive
Changes over time, eroded with development ( not always look at Germany for example),Rise in exchange rate which then lowers competitiveness
What is the natural rate of unemployment
When the labour market is in equilibrium - structural, frictional and seasonal unemployemnt
What policies would reduce the natural rate of unemployment?
What determines the natural rate of unemployment
Free market economists - generous benefit systems, excessive labour market regulation
Interventionists
Lack of training
Lack of transport/ infrastructure
What is fiscal drag?
Higher wages following higher prices pushes tax payers into higher marginal tax rate brackets
Two types of disequilibrium unemployemnt
Cyclical unemployment (unemployment in a recession due to a lack of aggregate demand)
Real wage unemployment ( wages are forced above equilibrium in a labour market - excess supply of labour)
How is the CPI inflation rate measured?
Expenditure survey, consumer basket, prices weighted (basket updated yearly)
Index number
Raw number / base year raw number x 1000
Limitations of CPI
Not totally representative - different households spend inferential amounts
Doesn’t include the price of housing - housing tends to rise faster
How does the RPI differ from the CPI?
RPI includes housing costs (mortgage payments), CPI takes into account substitution effects when the price of a good goes up. RPI tends to be higher
What is the claimant count
Number receiving unemployemnt benefits
What is the ILO? Labour force survey?
definitions of employed/ unemployed
legal requirement - classes people as employed, unemployed or inactive by labour force survey definitions
Which tends to be higher LFS or claimant count?
LFS - people aren’t eligible for benefits
Role of the WTO
Set and enforce rules on trade, resolve disputes, forum for negotiating trade liberalisation,
What is Thomas Pikettys influential theory on inequality?
Rate of return of capital is greater than growth hence rising inequality is inevitable
What does the financial policy committee do?
Macroprudential regualtion, identify and monitor against systemic risk, b of E
What does the prudential regualtion authority do?
Microprudential regualtion, specifics liquidity/ capital ratios, industry standards for conduct
What does the financial conduct t authority do?
Prevents loan sharks, supervises against Margot rigging, promotes competition (deregulation), miselling prevention
