Macroeconomic environment Flashcards
What is a macroeconomic policy ?
A policy used by governments ti try to influence overall economic policy
What is GDP ?
the total value of goods and services produced
How to measure economic growth ?
GDP
How is GDP measured ?
the income method
the expenditure method
the output method
What is the income method ?
adding together all of the incomes paid - GNP which is final goods and services produced by domestically owned factors of production
What is the expenditure method ?
Market price - measures GDP at market price (the cost that final goods and services are)
What is the output method ?
Factor cost - aggregating the value of final output of new goods and services
Value added in production process - value of finished product minus value of resources used
What are injections ?
- export sales
- government expenditure - current and capital
- private sector investment expenditure
What are withdrawals ?
- imported goods and services
- taxes
- savings
what is nominal GDP
GDP at current prices
What is real GDP ?
GDP at constant prices
What is full employment ?
Situation where all unemployment is structural and frictional
How is inflation measured ?
a price index
what is perfectly anticipated inflation ?
this arises when the actual rate of inflation is equal ro the expected rate of inflation
What is imperfectly anticipated inflation ?
this arises when the actual rate of inflation differs from the anticipated rate of inflation
what is hyperinflation ?
this arises when the rate of inflation is extremely high
What is the balance of payments ?
this is a record of the transactions which take place between the residents of one country and the rest of the world over a given periosd usually a year
What are the three possibilities that arise for the balance of payments ?
- deficit - where the total value of imports exceeds the value of exports
- surplus - where export revenues are greater than the total import bill
- balance - where the values of exports and imports are roughly equal
What is austerity ?
This is a programme of public expenditure
What is classical economics ?
This is a pre-keynesian approach based on the assumption that wages and prices adjust to clear the markets. Also, monetary policy doesnot influence for example, output and employment
What is aggregate demand ?
the total planned expenditures of all buyers of final goods and services ; comprises consumer expenditure , investment expenditure, investment expenditure, government expenditure and net exports
what is keynesian approach?
An approach based on the belief that capitalist economies are unstable and can come to rest at less than full employment. They favour the use of discretionary aggregate demand policies to stabilise the economy at or near fully employment
What is stagflation ?
A situation where high unemployment and high inflation occur simultaneously ; a combination of stagnation and inflation
What is monetarism ?
An approach based on the belief that capitalist economies are inherently stable unless disturbed by erratic monetary growth, and will return fairly rapidly to the neighbourhood of the natural level of output and employment when subjected to some disturbance
