Macroeconomics Flashcards
What is GDP?
Total output of an economy during a period of time.
What is real and nominal GDP?
Real GDP- takes into account the inflation using GDP deflator
Nominal GDP- measurements using prices that are current at the time of transaction
What is power purchasing parity?
Is the assumption that the exchange rates are in equilibrium
Takes into account the cost of living
What is inflation?
The general ride in prices across the economy
What is deflation?
General fall in prices across an economy
What is disinflation?
A fall in the rate of inflation
What is hyperinflation?
Inflation levels very high (50% usually)
What is CPI?
The average rate of inflation of all households across the UK
What is underemployed?
Those who would work more hours if available.
What is economically inactive?
Those people / student in the age range who are not considered active in the workforce
What are two ways of measuring unemployment?
Claimant count and ILO unemployment survey
What is the claimant account and disadvantage of it?
Number of people registered as unemployed and claiming unemployment benefits (JSA)
It is unreliable as it only captures those who are eligible for JSA and excludes those who are temporarily recognised as unemployed (pregnant women)
What is the ILO unemployment and disadvantage?
Labour force survey identifies number of people available for work, seeking work, but without a job
Based on sample evidence, gives picture of UK as a whole so not fully representative
What are the macroeconomic objectives?
1- Economic growth (positive, steady) 2- Unemployment (low and stable levels) 3- inflation (low, positive, 2%) 4- balance of trade (long term stability- small deficits and surpluses) 5- Balanced gov budget 6- protection of environment 7- greater distribution of income
What is a deficit of the current account
The value of imports is higher than the value of exports
What is a surplus on the current account?
The value of exports is higher than imports
What are the 4 stages of the economic cycle?
1- recession
2- recovery
3- Boom
4- slowdown
What are the injections to the CFOI?
1- government spending
2 investment
3- exports
What are the withdrawals to the CFOI?
1- government taxation
2- imports
3- savings
What is the balance of payments?
Record of all financial dealing over a period of time
What is the current account?
Where Payments for purchases and sales of goods and services are recorded
What is the capital and financial account?
Flows of money associated with saving, investment, speculation
What is aggregate demand?
Total a,out of spending on goods or services in an economy over a period of time
Reasons for movements along AD curve: (price factors)
1- The wealth effect
2- The interest rate effect
3- The international trade effect
Reasons for shift in AD: (consumption and investment)
1- changes in consumer/ business confidence
2- changes in interest rates
3- changes in personal/ business taxes
4- changes in level of household/ corporate indebtedness
5 - improvements in tech
Shifts in aggregate demand: (government spending and net trade)
1- changes in political priorities
2- changes in national income abroad
3- changes in exchange rates
4- changes in level of trade protection
What is aggregate supply?
Total output of goods and services that producers in an economy are willing to supply at a given price level over a given period of time
Factors affects SRAS:
1- Wage rates
2- Exchange rates
3- Raw material prices
4- Taxation
What does a LRAS curve show?
The level of full capacity output of the economy (no under-utilised resources)
Factors affecting LRAS
1- technology 2- education and skills 3- government regulations 4- population changes and migration 5- enterprise and risk taking 6- economics incentives
What is classical LRAS based on?
Based on the view that markets tend to correct themselves fairly quickly when pushes into a disequilibrium
