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economics macro > macro theme 2 2.1 > Flashcards

macro theme 2 2.1 Flashcards

1
Q

examples of market orientated strategies (5)

A

trade liberalisation
micro-finance loans
FDI- promoting
privatisation
tax cuts

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2
Q

what is trade liberalisation and what does it promote

A

reducing tariffs-the tax on goods and services imported from another country
it increases trade, products are cheaper, can import more for cheaper, (firms and consumers spend more)

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3
Q

what is micro-finance loans

A

loans to businesses to try and spend money to produce more

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4
Q

what is FDI-promoting

A

foreign direct investment- to go overseas for business

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5
Q

what is privatisation and why is it good

A

selling government owned businesses
firms are more efficient with resources and government can tax it

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6
Q

what is market-based strategies

A

the aim is to improve/ increase supply and demand to public services to increase a country’s economy

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7
Q

what are tax cuts and what do they help

A

people have more direct income to spend
increase supply and demand- which promotes FDI

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8
Q

economy is measured by certain macroeconomics(4)

A

economic growth (strong)
low inflation-2%
low unemployment
balance of payments- value of imports- exports=0

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9
Q

what’s GDP

A

the total amount of goods and services produced by one country over a set period

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10
Q

GDP equation

A

C+ I+ G+ (X-M)
C= consumer spending I=Investment G= government spending X= exports M= Imports

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11
Q

potential economic growth meaning

A

an expansion in the productive capacity of the economy

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12
Q

actual economic growth

A

the rate of growth real GDP within a set period

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13
Q

what are capital goods

A

are anything that helps to improve output (machines,robot)

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14
Q

what does the PPF curve mean

A

Production, possibility, frontier- maximum amount of goods that can be made with the resources

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15
Q

what is Nominal GDP

A

when GDP is measure using current prices. However prices are always rising so have to take them into account

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16
Q

What is real GDP

A

A value of GDP taking into account the increase of prices (inflation)

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17
Q

Real GDP formula

A

real GDP= Nominal GDP/real GDP X100

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18
Q

what does
per capita
total
volume
value mean

A

per person
total population
the amount
the monetary value

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19
Q

what is index numbers

A

a way of comparing the value of a variable in one period/ location with a base observation

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20
Q

what is index numbers

A

a way of comparing the value of a variable in one period/ location with a base observation

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21
Q

index numbers formula
what is base number

A

new price / old price X100
base is what u compare it to 100=base

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22
Q

why is Gross national income (GNI) useful

A

It’s preferred to measure an economy over GDP
helps to reflect incomes received by residents in a country including their net flows of income between countries

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23
Q

GNI per capita strengths (4)

A

clearly defined and understood
an agreed standard
widely available for many countries
takes account of the population size of each country

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24
Q

GNI per capita weaknesses (4)

A
  • does not take into account the distribution of income
  • the quality of collecting data across countries could vary
  • does not take into account exchange rates
  • only takes into account income nothing else such as well-being or happiness
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25
exchange rate problems (2)
* economists want to compare average incomes hard to compare as the value of currency not always stable * some currencies are pegged to other currencies like china and the US, if one appreciates so does the other country
26
what does purchasing power parity (PPP) take into account
exchange rate is taken into account
27
what is (PPP) formula
cost of goods in currency x /cost of goods in currency y X100
28
what's the limitation of using GDP to compare living standards between countries and overtime (4)
starting positions are different between countries environmental factors external shocks- something outside of the economy's control health and education
29
what is subjective happiness
happiness is based on opinions, everyone's happiness is different
30
what does the Uk's national well-being happiness measure
measure the quality of life for people within the country
31
what factors do the Uk national well being happiness measure on (3)
relationships health education
32
what is Easterlin Paradox
the hypothesis that happiness increases with average incomes, but only up to a certain point
33
what is economic growth
when GDP is rising in an economy
34
what is marginal propensity to import
with an increase in income people import more products
35
what is marginal propensity to save
with an increase in income people save their money by spending money locally
36
what is inflation
a sustained rise in the general price level in an economy
37
what happens if inflation is not controlled (5)
firms have higher costs firms have lower levels of profits firms have less money to spend on investment consumers have less money to spend people might lose their jobs
38
what are the causes of inflation
demand pull cost push growth of money supply
39
what is demand pull
an increase in demand, increases inflation
40
what is cost push inflation
this is when there is a sustained rise in the costs of production
41
what causes cost of production to rise (4)
oil prices increase in wages increase in VAT decrease in exchange rate
42
what is growth of money supply
increasing in the supply of money
43
what is aggregate demand
(GDP)- is the total amount of goods and services demanded within an economy
44
what is the formula for aggregate demand
C+ I+ G+ (X-M)
45
what is aggregate supply
is the total amount of goods and services supplied by an economy
46
what are the impacts of inflation on the consumers (4)
lower standard of living real value of savings decrease confidence would decrease (as value of money decreases) real incomes decline
47
what are the impacts of inflation on workers (2)
unemployment rates rising demand for higher wages
48
what is disinflation
is the falling rate of inflation
49
what is deflation
is the fall in the general price levels
50
what is unemployment
people without a job, who want a job, who are actively looking and ready to work within the next 2 weeks/ or found a new job and going to start work in the next 2 weeks
51
what is claimant court
measures everyone who receives job seekers allowanced (measure of unemployment)
52
claimant court excluded people who were looking for work:
* over the age of receiving state pension * in full education * or have not paid national insurance in recent years
53
what is economically inactive
those people of working age who are not looking for work, for many different reasons
54
what is discouraged workers
those who have been unable to find employment and who are no longer looking for work
55
what is a workforce
people who are economically active (either in employment or unemployment)
56
what is underemployment (3) | (under-utilising the workforce)
* someone is in part time work, but would like to have a full time job * someone's skills are not being utilised (university graduate) * someone is employed but there is not a lot for them to do
57
what are the types of unemployment (6)
* demand- deficient unemployment * structural unemployment * frictional unemployment (inbetween jobs) * seasonal unemployment * voluntary unemployment * real wage inflexibility
58
what is demand-deficient unemployment
when the economy is operating below full employment due to a lack of demand in the economy | cyclical unemployment can occur
59
when can cyclical unemployment occur | how can it be solved
when there is a fall in demand within an economy eg a recession | through a monetary policy- cutting interest rates to boost AD
60
when does structural unemployment occur
when there is a change in the structure of the economy, which then leads to a fall in demand for certain jobs or skills associated with them. | eg less damand for jobs such as ship building
61
how can structural unemployment be solved
through investment in High-Growth Industries- public spending on sectors with sectors with strong demand (eg healthcare,tech) to create job opportunities
62
when/why does voluntary unemployment occur
* when workers choose not to work at the wage rate. * could be becasue there is little incentive to work. caused by: high tax rates, low wages, poor working conditions
63
how can voluntary unemployment be solved (3)
by increasing wages, reduce income tax, reduce barners to entry for certain jobs.
64
when does real wage inflexibility occur
when wage rates are above the market equilibrium rate
65
what is 'sticky downwards' and who believed in it
wages will not drop, workers and trade unions would not let wages fall until the market naturally develops it's new equilibrium point. (keynesians)
66
how can real wage inflexibility be solved
the government needs to act to make sure the labour markets work more efficiently. also allows wages to adjust naturally.
67
what is migration
the movement of people from one country/ region to another to benefit from greater economic opportunities than their host country/ region
68
what is voluntary unemployment
when an individual chooses not to accept a job at the going wage rate
69
what is involuntary unemployment
when an individual is willing to accept a job at the going wage rate but is unable to find employment.
70
what is globalisation and the cause of it increasing
* is the process of increased interconnectedess of individual economies throughout the world * international trade
71
what is balance of payments
a set of accounts showing the transactions conducted between residents of a country and the rest of the world
72
what does the balance of payments moniter
* transactions of exports/ imports * assets * flows of income
73
what 3 categories are balance of payments split into
1. current account 2. capital account 3. financial account
74
what is a current account
shows a country's transactions with goods, services and income
75
what is a capital account measure
financial transactions which do not impact income, production or savings, such as trademarks and copyrights
76
what is a financial account
financial transactions between a country and the rest of the world
77
what 4 categories are balance of payments split into
1. the balance of trade in goods 2. the balance of trade in services 3. primary income 4. secondary income
78
what is primary income in balance of payments made up by
income earnt by uk businesses abroad minus the income made by foreign firms in the uk
79
what is secondary income in balance of payments | it's the current transfer
are payments by the government or individuals payments could be on: * taxes * social contributions * aid * military grants
80
what is the equation for current account
x-m
81
what is errors and omissions
an amount added to the balance of payments to make sure it balances
82
what does the surplus show
the value of money required to buy the goods and services being imported into the country
83
what does the state of the current account help to identify
the state of the economy
84
what is the problem of having a deficit
the economy is spending more on imports that it receives for exports
85
how are deficits and surpluses caused (4)
* exchange rate fluctuations * decrease in the number of trading barriers * international competitiveness * economic growth (MPM)

economics macro (4 decks)

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