Macroeconomics Flashcards
What are 3 withdraws to the circular flow of income
- Savings
- Taxes
- Imports
What are three injections into the circular flow of income
- Investment
- Government spending
- Exports
What is the difference between real and nominal gdp
Real gdp takes into account inflation unlike nominal
What is the definition of gdp
Total value of all goods and services produced in a given time period
What is inflation
Sustained price increase
(value of money is decreasing)
What is disinflation
Where price rises at a slower rate
What is Deflation
When prices drop
What is a real wage drop
When we see inflation increase over wage increase
What are the 4 main types of unemployment
- Frictional
- Seasonal
3.Cyclical - Structural
What is one method used to measure unemployment
The claiming count
What does the claiming count do
Counts the number of people that are claiming unemployment benefits
What are some limitations with using the claim in count
- Sometimes there is a stigma around claiming benefits
- There can be strict eligibility
Eg partner earns too much or saving over £16000
What is the formula for AD (aggregate demand)
AD = C + I + G + (X-M)
What is AD
The total demand for goods and services produced in an economy at a given price level
How much of AD does consumption make up for
65%
What does consumption represent
Households expenditure on goods and services
What is tourism known as
An invisible export
What are factors influencing consumption
- Consumer confidence
- Reduction in the rate of interest
- Increased availability of credit
- Cuts in income tax
- Wealth effects
- Expectations of inflation
What are the two main causes of inflation
Demand pull
Cost push
What are the 4 main macroeconomic objectives
Sustainable economic growth
Inflation 2% (+/- 1%)
Unemployment- 5% of labour force
Balance of payments (slight deficit)
What is the multiplier effect
When an initial change in aggregate demand has a much greater final impact on national income
What did John Maynard Keynes say
One persons spending is another’s persons income
What are the calculations for the multiplier
1 / (1-MPC)
1/MPW Where MPW = MPS + MPT + MPM
How can marginal propensity to consume be defined
How much of an addiction £1 of income do people consume
