Macroeconomics Flashcards
1
Q
What is demography? (1)
A
- Identifies trends in populations over time e.g. ageing population, fewer younger people - greater need for govt investment, supply side policies, investment in tech
2
Q
What are the GDP limits of the EU? (2)
A
- Debt to GDP ratio - 40%
- Upper deficit limit - 3%
3
Q
What are socio-economic changes? (3)
A
- Environmental change
- Demographic
- Global economy
4
Q
What are the major trends in the global economy? (5)
A
- Growth in emerging markets
- International trade
- Financial globalisation
- Technology change
- Increased demand for commodities
5
Q
What is PPI? (1)
A
- Producer’s price index (cost of inputs) indicates inflation expectations. If a producer is spending more on suppliers (inputs), they will pass the cost onto the consumer in the form of higher prices
6
Q
What are some leading economic indicators? (3)
A
- Consumer or business surveys
- Money supply and credit growth
- Stock market movements
7
Q
What are some lagging economic indicators? (1)
A
- Unemployment levels (moves 3 or 4 quarters after the output itself changes)
8
Q
What is a coincident indicator? (3)
A
- Industrial production
- GDP move with the economy
- National Bureau of Economic Research measures this in the US
9
Q
How is government borrowing monitored? (4)
A
- Public Sector Net Cash Requirement (another name for a budget deficit)
- Deficit = borrowing > revenue
- Surplus = revenue > borrowing
- Anything to do with govt spending/borrowing = fiscal
10
Q
What is inflation? (2)
A
- A general rise in average price level over a period of time
- Fall in purchasing power
11
Q
What are the measures of inflation? (2)
A
- RPI - price of a weighted basket of goods purchased by the average household. If price of goods in a basket increases, so will the index value. Index linked gilts are linked to RPI - using a level 3 months prior to any payment date
- CPI - monetary policy committee sets a CPI target of 2% - took over from RPI in 2003 as measure of inflation
12
Q
What is the base rate? (2)
A
- Monetary tool used by the MPC in the BoE to influence interest rates
- 0.5% is the target base rate
13
Q
What are the various stock market movements in an economic cycle? (5)
A
- Bull market - rising price trend
- Bear market - falling price trend
- Contrarian approach - doing the opposite of the trend e.g. buying when the trend is selling (long)
- Cyclical companies - firms the do well when the economy is doing well, but do badly when there is a downturn e.g. luxury goods and house builders
- Counter cyclical companies - firms that do well when the economy is in a downturn and not so well when the economy is booming e.g. cheaper alternatives
14
Q
What is the balance of payments? (1)
A
- Net flow of funds into or out of the uK
15
Q
What is the current account on the BoP? (5)
A
- Current account = trade position of the UK - net exports - (X-M).
- Current account includes cash flow from visibles such as physical goods e.g. coal, steel and invisibles such as tourism, services, banking
- The total of the current account = balance of trade
- Exports > imports = BoP surplus - correct this by
- Import > export = BoP deficit
16
Q
What is the current account on the BoP? (4)
A
- Capital account = includes FDI - domestically and abroad
- Measures investment relationship of the UK with the rest of the world
- Longer term aspect of BoP
- Net impact of UK investors in foreign investments and non-UK investors in the UK
17
Q
What is the relationship between BoP and exchange rates? (1)
A
- If demand for a foreign good increases, imports will increase and the price of the currency will also increase, eventually making imports more expensive
