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rupert > macroeconomics > Flashcards

macroeconomics Flashcards

1
Q

What is supply ?

A

supply comes from businesses selling goods and services

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2
Q

What is demand?

A

demand comes from customers buying things

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3
Q

what are the three ways of measuring the total national income?

A

the expenditure method , the income method and the output method

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4
Q

how does the expenditure method work?

A

Total amount spent on goods and services

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5
Q

how does the income method work?

A

This is the total income received by people in the economy.

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6
Q

how does the output method work?

A

the total value of output produced by firms

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7
Q

What are the leakages of the circular flow of income

A

savings imports taxes

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8
Q

what are the injections of the circular flow of income

A

exports investments and government spending

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9
Q

what is aggregate demand?

A

a measure of the total value of every good and service demanded in an economy over a period of time

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10
Q

What is aggregate supply?

A

total value of goods and services produced in an economy

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11
Q

What is RDI?

A

real disposable income(money you can spend after tax deductions.

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12
Q

What is the formula for aggregate demand?

A

C+I+G+(X-M)

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13
Q

What does SRAS stand for?

A

short run aggregate supply

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14
Q

What does LRAS stand for?

A

Long run aggregate supply

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15
Q

What does Yfe stand for?

A

full employment level of national output

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16
Q

what is consumer confidence?

A

if consumers are confident their RDI will increase then they might be more likely to spend money

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17
Q

what does volatile mean?

A

changeable

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18
Q

What are the four factors of production?

A

land labour capital and enterprise

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19
Q

what is a physical flow and a monetary flow of the circular flow of income?

A

Physical flow is the actual flow of goods and services
Monetary flow is the flow of money responsible for the flow of the physical fow

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20
Q

how much of the UKs AD is C?

A

60-65%

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20
Q

How much of the UKs AD is I?

A

15-20%

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21
Q

How much of the UKs AD is G?

A

20-25%

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22
Q

What is the formula for AD?

A

C+I+G+(X-M)

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23
Q

why might LRAS shift?

A

changes in the quality and/or quantity of factors of production

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24
Q

What is the multiplier effect?

A

an initial change in aggregate demand has a greater final impact on the level of equilibrium national output

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25
Q

What is the accelerator?

A

an increase in real gdp will often lead to a proportionately higher increase in the private sector investment

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26
Q

What does propensity mean?

A

probability/likelihood

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27
Q

APC is?

A

average propensity to consume

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28
Q

APT is?

A

average propensity to tax

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29
Q

APS is?

A

average propensity to save

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29
Q

APM is?

A

average propensity to import

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30
Q

MPC and MPT and MPS and MPM are?

A

marginal propensity to consume,tax,import and save

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31
Q

MPC+MPT+MPS+MPM=?

A

1

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32
Q

How do you calculate MPC, MPT, MPS, MPM

A

change in(C/T/S/M) over change in Y

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33
Q

what are the 5 characteristics of a boom?

A

high animal spirits, high economic growth, demand pull inflation, low unemployment, improved budget

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34
Q

what are the 5 characteristics of a bust?

A

low animal spirits, negative economic growth, low inflation/deflation, high unemployment, worsened budget.

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35
Q

what is the main objective of most governments?

A

economic growth- it will cause an increase in standard of living

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36
Q

what are the 6 objectives of a government for an economy?

A

economic growth, stable prices, full employment, stable balance of payments, fairer distribution of income, control government finances.

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37
Q

why are stable prices an economic objective of a government?

A

high or volatile inflation can cause low investment because the households and firms will have low confidence

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38
Q

why is full employment an economic objective of a government?

A

get closer to market equilibrium of full employment in order to maximise output

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39
Q

why are stable balance of payments an economic objective of a government?

A

so the government doesn’t have a budget deficit

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40
Q

why is a fairer distribution of income an economic objective of a government?

A

depending on the politics of the government the households would vote for fairer way of distributing the income-reduce poverty

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41
Q

why is control over government finances an economic objective of a government?

A

reduce the government debt (if any) and therefore operate on a budget equilibrium.

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42
Q

how to write an AWESOME essay paragraph

A

Answer the question
Why is this the case
Example of this is
Show using a diagram
Outcome of the diagram
Meaning in the bigger picture
Exception, alternate argument

43
Q

what does per capita mean?

A

per person

44
Q

how do you calculate the rate of change in GDP?

A

change in GDP/original GDP X100

45
Q

how do you calculate real GDP?

A

nominal GDP/price index X100

46
Q

how do you calculate real GDP per capita?

A

RGDP/population

47
Q

how do you calculate GNI?

A

GDP+net property income from abroad

48
Q

what is a developed country?

A

a country that is dominated by the tertiary sector characterized by high levels of GDP per capita

49
Q

what is an emerging country?

A

dominated by secondary sector, heavily industrialized. Real GDP per capita is often far lower than developed economies, they also experience high levels of inequality

50
Q

what is a developing country?

A

a country that is poor and dominated by the primary sector , real GDP per capita is low and there is extreme poverty

51
Q

what countries have a developed economy?

A

western Europe and north America

52
Q

what countries have an emerging economy?

A

Asia, North Africa and South America

53
Q

what countries have a developing economy?

A

sub-Saharan countries

54
Q

what are the factors of HDI?

A

adult literacy rate, real GNI per capita, life expectancy at birth

55
Q

what are the 4 reasons why growth doesn’t always lead to improvements to the standards of living

A

Inequality-may only benefit one group if there is no trickle down effect. Government failure- the government is corrupt and spends money on unnecessary things. Capital flight- money that is generated through FDI in a different country will extract resources. Growth may be driven by non-renewable resources- therefore only benefits short term.

56
Q

what is the definition of sustainable growth

A

meets the demands of the present without compromising the ability for future generations to meet their needs

57
Q

what is a SDG stand for

A

sustainable development goals

58
Q

what does sustainable growth do for an economy.

A

creates more businesses, more jobs, increases the RDI of each household and increasing government tax revenues.

59
Q

what are the 4 types of unemployment?

A

seasonal, frictional, cyclical and structural

60
Q

what is frictional unemployment?

A

workers are temporarily out of work due to changing personal circumstances or simply moving between jobs

61
Q

what is cyclical unemployment?

A

also known as ‘demand deficit’ occurs as AD shifts left. unemployment will happen naturally when there is a downturn in the economic cycle(recession)

62
Q

what is structural unemployment?

A

a lack of mobility in the workforce so that available jobs don’t match the available worker

63
Q

what are the two types of structural unemployment?

A

occupational immobility and geographical immobility

64
Q

what is geographical immobility regarding unemployment?

A

jobs exist in one place in the country but the unemployed live elsewhere

65
Q

what is occupational immobility regarding unemployment?

A

unemployed workers have skills that employers no longer need but the available workers don’t have the skills to perform these jobs

66
Q

what is the formula for the unemployment rate?

A

unemployed/economically active X100

67
Q

what is the labour force survey?

A

a survey carried out every three months and a questionnaire is sent to 40,000 households across the country asking people about their employment circumstances.

68
Q

what is a claimant count

A

measures people claiming job seekers allowance benefit payments however not many people bother claiming them

69
Q

is a claimant count specific to the UK

A

yes

70
Q

what are the 4 causes of unemployment?

A

changes in the economic cycle, developments in technology, globalisation and seasonal factors

71
Q

how are changes in the economic cycle a cause of unemployment?

A

free market economies vary between periods of a boom and bust. a boom will have low unemployment whereas a bust will have high unemployment

72
Q

how is developments in technology cause of unemployment?

A

this a major cause of structural unemployment as some industries become obsolete there fore peoples lack of skills will transfer to significant areas of growth

73
Q

how is globalisation a cause of unemployment?

A

competition from developing and emerging economies lead to companies offshoring for cheaper labour

74
Q

how are seasonal factors a cause of unemployment?

A

there is more availability in some parts of the year for jobs compared to others

75
Q

what are the 4 consequences of unemployment

A

economy not achieving it potential, cost to the government, social problems, hysteresis

76
Q

how is the economy not achieving its potential a consequence of unemployment?

A

there would be a negative output gap because the economy could be operating more efficiently

77
Q

how is cost to the government a consequence of unemployment?

A

there are less people paying tax and more people claiming benefits so G is higher than otherwise.

78
Q

how are social problems a consequence of unemployment?

A

being unemployed is stressful and can damage your health, and therefore increase demand for healthcare and could lead to higher crime

79
Q

how is hysteresis a consequence of unemployment?

A

unemployment will breed unemployment, children who don’t have parents who work are unlikely to work themselves

80
Q

what is the definition of inflation?

A

a sustained increase in the general price level

81
Q

what is the definition of deflation?

A

inflation is negative (price level is falling)

82
Q

what is the definition of disinflation?

A

the price level is increasing but at a lower rate than it was previously

83
Q

what is the definition of hyperinflation?

A

increases in price level spirals out of control

84
Q

what is an example of inflation?

A

UK 2022 inflation rate reached 10%

85
Q

what is an example of disinflation?

A

USA 2022-2023 8.3%-4.9%

86
Q

what is an example of deflation?

A

Japan 2016- -0>3%

87
Q

what is an example of hyperinflation?

A

Argentina 2023 - 102.4%

88
Q

what generally is the target inflation rate for most economies ?

A

2%

89
Q

Is inflation good?

A

provided its under control 2% is normally the best rate

90
Q

what is the cpi?

A

consumer price index

91
Q

what is the rpi?

A

retail price index?

92
Q

what is the difference between the CPI and the RPI?

A

the RPI is only used in the UK and it takes into account housing prices (rent and mortgage interest payments

93
Q

how many goods and services are used in the CPI?

A

750

94
Q

how do you calculate CP from the CPI?

A

the base year is always 100, your find the weight of a category and multiply it by the new price index(e.g.110), do this for each category and then add up the multiplications for the total new price index. inflation is a % so do percentage change calculation to work out the inflation rate

95
Q

What is demand pull inflation?

A

a type of inflation where AD shifts right and the price level increases

96
Q

what is cost push inflation?

A

a type of inflation where the SRAS shifts left and the price level increases

97
Q

what are the causes of demand pull inflation?

A

increase in the money supply, lower interest rates, cuts in income tax increased business and consumer confidence and cheaper exports

98
Q

What are the causes of cost push inflation?

A

increase in wages, increase in the cost of materials, more expensive imports, higher business taxes or a disruption in the supply chain

99
Q

What is bad deflation?

A

AD shifting left will reduce real GDP and the PL will decrease

100
Q

What is good inflation?

A

SRAS shifting right will increase Real GDP and decrease the PL (win win)

101
Q

What is bad deflation usually caused by?

A

fall off in consumer confidence, fall of in business confidence, deflationary government policies raising income tax or cutting G, higher interest rates

102
Q

What is good deflation caused by?

A

improvements in the productivity of the workforce, or new resources being discovered increasing the supply of goods and services.

103
Q

why is inflation being above the target level bad for the economy?

A

creates uncertainty- which will decrease AD and probably AS, FDI is negatively affected as everything becomes too expensive - the government also finds it harder to borrow money as everyone else will charge higher interest rates, decrease international competitiveness, increased inequality - higher income people can cushion themselves from the effects of higher prices, industrial unrest- workers demand pay rise inline with inflation, inflationary spiral- people will expect more inflation.

104
Q

why is inflation being above the target level good for some economic agents?

A

borrowers can gain overtime as the monthly repayments are worth less on a mortgage for example. companies could take advantage of a shortage of material e.g. oil companies could charge more in 2022 to make an even larger profit.

105
Q

why would deflation be considered worse than slightly too high inflation?

A

deflation is associated with a recession everyone makes less profits,

106
Q
A

rupert (19 decks)

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