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Economics > Macroeconomics > Flashcards

Macroeconomics Flashcards

1
Q

What are 3 withdraws to the circular flow of income

A
  1. Savings
  2. Taxes
  3. Imports
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2
Q

What are three injections into the circular flow of income

A
  1. Investment
  2. Government spending
  3. Exports
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3
Q

What is the difference between real and nominal gdp

A

Real gdp takes into account inflation unlike nominal

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4
Q

What is the definition of gdp

A

Total value of all goods and services produced in a given time period

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5
Q

What is inflation

A

Sustained price increase
(value of money is decreasing)

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6
Q

What is disinflation

A

Where price rises at a slower rate

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7
Q

What is Deflation

A

When prices drop

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8
Q

What is a real wage drop

A

When we see inflation increase over wage increase

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9
Q

What are the 4 main types of unemployment

A
  1. Frictional
  2. Seasonal
    3.Cyclical
  3. Structural
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10
Q

What is one method used to measure unemployment

A

The claiming count

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11
Q

What does the claiming count do

A

Counts the number of people that are claiming unemployment benefits

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12
Q

What are some limitations with using the claim in count

A
  1. Sometimes there is a stigma around claiming benefits
  2. There can be strict eligibility
    Eg partner earns too much or saving over £16000
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13
Q

What is the formula for AD (aggregate demand)

A

AD = C + I + G + (X-M)

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14
Q

What is AD

A

The total demand for goods and services produced in an economy at a given price level

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15
Q

How much of AD does consumption make up for

A

65%

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16
Q

What does consumption represent

A

Households expenditure on goods and services

17
Q

What is tourism known as

A

An invisible export

18
Q

What are factors influencing consumption

A
  1. Consumer confidence
  2. Reduction in the rate of interest
  3. Increased availability of credit
  4. Cuts in income tax
  5. Wealth effects
  6. Expectations of inflation
19
Q

What are the two main causes of inflation

A

Demand pull
Cost push

20
Q

What are the 4 main macroeconomic objectives

A

Sustainable economic growth
Inflation 2% (+/- 1%)
Unemployment- 5% of labour force
Balance of payments (slight deficit)

21
Q

What is the multiplier effect

A

When an initial change in aggregate demand has a much greater final impact on national income

22
Q

What did John Maynard Keynes say

A

One persons spending is another’s persons income

23
Q

What are the calculations for the multiplier

A

1 / (1-MPC)
1/MPW Where MPW = MPS + MPT + MPM

24
Q

How can marginal propensity to consume be defined

A

How much of an addiction £1 of income do people consume

25
Q

What is the consequence of high MPM

A

If MPM is high additional Y will not be spent within the economy as people are importing frequently

26
Q

What does an expansionary fiscal policy aim to do

A

Increase aggregate demand

27
Q

What else is an expansionary fiscal policy known as

A

Fiscal stimulus package

28
Q

What does a contractionairy fiscal policy aim to do

A

Reduce the budget defect slow down ad

29
Q

What are some of the issues a government face in a boom

A

Inflationary pressures

30
Q

What do demand side policies aim to do

A

Stabilise the macro economy in the relatively short run

31
Q

What is. Budget deficit

A

Gov spending > tax revenue

32
Q

What are examples of a direct tax

A

Income tax
National insurance

33
Q

What are examples of indirect tax

A

VAT
Sugar tax (hypothecated the tax)

34
Q

What is national debt

A

Accumulation of budget deficits over the years

35
Q

What is the uk govs goal for economic growth

A

For the economy to grow sustainably on average it has been about 0.6% a year

36
Q

What is the aim for the gov current account

A

Small deficit (imports>exports) avoid deficit above 5%

37
Q

What is the aim for gov finance

A

Budget deficit no more than 5% of gdp

Economics (9 decks)

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