Macroeconomics Flashcards
(49 cards)
Macroeconomics
Studies whole economy, focus on why it grows/why activity fluctuates
Households
Owners of productive resources, buyers of final goods and services
Firms
Employers of resources, produce goods and services for economy
Real flow
Flow of goods, services and resources
Money flow
Flow of spending and income
Factor market
Firms hire resources from households in exchange for income
Product market
Households/firms spend income on goods and services
Interdependent
We all depend on each other to provide goods and services to satisfy wants/needs
Capital market
Mediator between savers and investors
Savings
Portion of income not spent on goods and services for CURRENT consumption
Leakage
Reduces flow of money through the economy
Investment
Expenditure on capital goods to use in production
Injection
Money put back into the economy that offsets leakages
Transfer payment
Government provision of social welfare (e.g. Pension, job search/Childcare allowances)
Taxation
Money paid to the government by households
Government expenditure
Return flow of taxation from the government for capital or current goods
Open economy
A economy that allows overseas trade
Why trade?
Allows items from overseas that cannot be produced in the domestic economy
Import
Money flow from Australia to overseas, higher because labour is more expensive in Australia
Export
Money flow from overseas to Australia
Why do capital markets exist?
To match household needs with surplus income/firms borrowing for investment
Government sector
Provides for community needs financed by taxation
Macroeconomic equilibrium
ΣO=ΣY=ΣE (sum of output = sum of income = sum of expenditure)
When is capital market at equilibrium?
S=I (savings = investment)
