Macroeconomic Objectives Flashcards
What is macroeconomics ?
Looking at the economy on a large scale
What are the 4 main macroeconomic goals?
Economic growth
Low unemployment
Balance of payments
High quality of life
What indicators will help us understand the economy’s health?
The Labour Force Survey - for unemployment
CPI - consumer price index - for inflation
GDP or Real GDP - economic growth
What is the circular flow of income ?
It lets us know the interaction between the firms and households
Give examples of injections to the circular flow?
Money spent from the government
Investments
Money spent by foreigners - exports
What are examples of withdrawals from the circular flow ?
Savings
Imports
Taxes
What is macro equilibrium
It is when injections equal withdrawals
When Aggregate Demand equals Aggregate Supply
What is national income?
It measures the monetary value of the flow of output of goods and services produced in an economy over a period of time
What are the three ways of measuring GDP?
The expenditure method - C+I+G+(X-M)
C= Consumption I= investment G= Government X= exports M= imports
The output method
The income method - income + profits+ rent income
They should all equal the same thing
What is GNI?
Gross National Income measured the final value of incomes flowing to Uk owned factors of production (Land,Labour, Capital and Enterprise)
whether they are located in the uk or overseas.
It is GDP + Net property income from abroad
Takes into account who made it
What is GDP per capita?
Real GDP per capita= real income per head of population
How can GDP overestimate a nation’s wellbeing ?
GDP includes money spent on things that are not beneficial and does not increase standard of wellbeing
How can GDP underestimate a nation’s well being ?
It does not include voluntary work or illegal transaction, it also does not include quality of goods and services.
It does not consider health either.
What is the difference between economic growth and economic welfare ?
Economic growth is sustained growth of real GDP overtime which contributes to rising standards of living as per capita incomes grow
While Economic welfare is a wider view of well being both social and economic , many aspects of well being are not material aspects of life and are not measured by GDP statistics.
