MacroEconomics Flashcards
is a social science concerned with the production, distribution and consumption of goods and services
Economics
deals with question that whether economics falls into the category of science or arts.
Nature of Economics
Deals with systematic studies that signify the cause and effect relationship
Economics as Science
It is said that knowledge is science, action is art
Economic as Art
used to solve various economic problems in society
Economic theory
4 factor of economics
labor, land,capital and entrepreneurship.
shows the flow of money goods and services in an economy
The circular flow model
presents all the individuals as families that make up the economy
household
all the businesses that produce goods and serviced in the economy
firm
government and all the public institutions involved in the economy
government
all the actors outside the domestic economy
foreign sector
financial institutions
financial sector
Two sector
household and firms
three sector
household, firms and government
Four sector
household, firms, goverment and foe
shows the continuous flow of goods and payments between firms and household.
Circular flow model of output and income
top half of Circular flow model of output and income
Factor Market
bottom half of Circular flow model of output and income
Product Market
demonstrate how money moves through society
circular flow income model
injection-introduction of income into the flow
in flows
leakages withdrawal of income from the flow
outflow
refers how an increase in one economic activity can cause an increase throughout many other related economic activities
Multiplier effect
Types of multiplier
keynesian multiplier, fiscal multiplier, employment multiplier, investment multiplier,trade multiplier, money multiplier
-also knows as income or expenditure multiplier
-assesses how changes in spending by household, businesses or the government ripple through the economy.
↑government spending- ↑economy
keynesian multiplier
states that output (Q) is a function (f) of: (is determined by) the factor
inputs, land (L), labour (La), and capital (K), i.e
-Q = F {(L)(LA)(K)}
PRODUCTION FUNCTION
focus exclusively on the impact of changes in government fiscal policy
fiscal multiplier
shows how creating or losing a certain number of jobs in one industry or sector can lead to the creation or loss of additional jobs in other related industries or sector.
employment multiplier
refers to the impact that changes in a countrys exports and imports have on its economy
trade multiplier
shows how an initial deposit into the banking system can lead to a larger increase in the money supply as banks create new loans and deposit
Money Multiplier
proportion of a raise that is spent on the consumption of goods and services as opposed to being saved
Marginal prosperity to consume
all factors are held constant
ceteris paribus
When the price increases, the quantity demanded decreases. When the price decreases, the quantity demanded increases, ceteris peribus.
Law of demand
consumers consumes more unit of good per unit of time,his total unity increases, recahes its maximum point, and begin to decrease
Law of Diminishing Marginal Utility
a table that shows the quantity demanded of a good or service at
different price levels.
demand schedule
is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time.
demand curve
less demand
contraction in demand
(more demand
expansion in demand
describes a shift in consumer desire to purchase a particular good or service,
irrespective of a variation in its price
change in demand
economic principle referring to a consumer’s desire to buy things.
demand
refers to how sensitive demand for a good is compared to
changes in other economic factors, such as price or income.
elasticity of demand
the price of a product increases, the quantity of rpoduct that suppliers offer will increase, and vice versa ceterus parabus
Law of supply
defined as one where a change in price does not significantly
impact demand for that product
Inelasticity
is a graphical representation of the quantity of a product that a supplier is willing to offer
at any given price.
supply curve
also known as total output, is the total supply of goods and services produced within an
economy at a given overall price in a given period.
aggregate supply
is a chart that shows how much product a supplier will have to produce
to meet consumer demand at a specified price based on the supply curve.
supply schedule
Determinants of Aggregate Supply
wages, energy prices, technology, capital stock
refers to a shift, either to the left or right, in the entire price-quantity relationship that
defines a supply curve.
change in supply
an economic measurement that calculates how closely the price of a product or
service is related to the quantity supplied. In other words, it shows how a change in price will affect suppliers’
willingness to produce the good or service.
price elasticity of supply
where supply is infinite at any one price
Perfectly elastic
where only one quantity can be supplied.
Perfectly inelastic
which graphically is shown as a linear supply curve coming from the origin.
Unit elasticity
is a bookkeeping system that a government uses to measure the level of the country’s economic activity in a given time period
national income accounting
is a measure of a nation’s economic activity by measuring the value of all
the finished goods and services produced by a nation’s economy in one year by its nationals.
Gross National Product
total value of all goods and services produced and services produced within a country’s borders during a specific time period.
Gross domestic product
measured in current market prices without adjusting for inflation or deflation
nominal gdp
adjust nominal gdp for changes in the price level
real gdp
Measures the income or earnings received by the country’s factors of production (
INCOME APPROACH
Measures the amount spent or paid (expended) on all goods and services during the year at market value
or prices.
EXPENDITURE APPROACH
a is a measurement of the GDP per person in a country’s population
GDP per capita
compares the year-over-year (or quarterly) change in a country’s
economic output to measure how fast an economy is growing.
GDP Growth Rate
also known as the spending approach, calculates spending by the different
groups that participate in the economy.
EXPENDITURE APPROACH
estimates the total value of economic
output and deducts the cost of intermediate goods that are consumed in the process (like those of materials and
services)
production approach
calculates the income earned by all the factors of production in an economy,
INCOME APPROACH
It is the sum of all income earned by
citizens or nationals of a country
Gross national income
