Macroeconomics

Question 1

Macroeconomics

Answer 1

Studies whole economy, focus on why it grows/why activity fluctuates

Question 2

Households

Answer 2

Owners of productive resources, buyers of final goods and services

Question 3

Firms

Answer 3

Employers of resources, produce goods and services for economy

Question 4

Real flow

Answer 4

Flow of goods, services and resources

Question 5

Money flow

Answer 5

Flow of spending and income

Question 6

Factor market

Answer 6

Firms hire resources from households in exchange for income

Question 7

Product market

Answer 7

Households/firms spend income on goods and services

Question 8

Interdependent

Answer 8

We all depend on each other to provide goods and services to satisfy wants/needs

Question 9

Capital market

Answer 9

Mediator between savers and investors

Question 10

Savings

Answer 10

Portion of income not spent on goods and services for CURRENT consumption

Question 11

Leakage

Answer 11

Reduces flow of money through the economy

Question 12

Investment

Answer 12

Expenditure on capital goods to use in production

Question 13

Injection

Answer 13

Money put back into the economy that offsets leakages

Question 14

Transfer payment

Answer 14

Government provision of social welfare (e.g. Pension, job search/Childcare allowances)

Question 15

Taxation

Answer 15

Money paid to the government by households

Question 16

Government expenditure

Answer 16

Return flow of taxation from the government for capital or current goods

Question 17

Open economy

Answer 17

A economy that allows overseas trade

Question 18

Why trade?

Answer 18

Allows items from overseas that cannot be produced in the domestic economy

Question 19

Import

Answer 19

Money flow from Australia to overseas, higher because labour is more expensive in Australia

Question 20

Export

Answer 20

Money flow from overseas to Australia

Question 21

Why do capital markets exist?

Answer 21

To match household needs with surplus income/firms borrowing for investment

Question 22

Government sector

Answer 22

Provides for community needs financed by taxation

Question 23

Macroeconomic equilibrium

Answer 23

ΣO=ΣY=ΣE (sum of output = sum of income = sum of expenditure)

Question 24

When is capital market at equilibrium?

Answer 24

S=I (savings = investment)

Question 25

What happens when leakages exceed injections?

Answer 25

Economy contracts; spending

Question 26

Disequilibrium

Answer 26

Inequality of savings/investment

Question 27

Equilibrium of circular flow

Answer 27

S+T+M=I+G+X

Question 28

Durable good

Answer 28

Expected to provide satisfaction for 3+ years

Question 29

White goods

Answer 29

Fridge, washing machine, oven, etc

Question 30

Brown goods

Answer 30

Furniture, carpets, etc

Question 31

Non durable goods

Answer 31

Consumed quickly after purchase

Question 32

How much of consumption is non-durables?

Answer 32

~35%

Question 33

Services

Answer 33

Non commodities, e.g. Education, health, recreation

Question 34

How much of aggregate consumption is services?

Answer 34

~50%

Question 35

Private investment

Answer 35

Spending by firms, not for current consumption

Question 36

Fixed investment

Answer 36

Private expenditure on production structure and equipment

Question 37

Residential fixed investment

Answer 37

Private expenditure on housing

Question 38

Changes in business inventories

Answer 38

Stocks produced but not sold

Question 39

Which sector is the most volatile?

Answer 39

Investment

Question 40

How much of Australia’s GDP is private investment?

Answer 40

11-23%

Question 41

How much of Australia’s GDP is government expenditure?

Answer 41

~22%

Question 42

G1

Answer 42

Current expenditure for daily government functions

Question 43

G2

Answer 43

Capital expenditure for future needs i.e. Infrastructure

Question 44

Net exports

Answer 44

Exports - imports

Question 45

How much of Australia’s GDP is net exports?

Answer 45

-3 to 5%

Question 46

When are net exports negative?

Answer 46

Imports exceed exports

Question 47

Cost of credit

Answer 47

Interest rates;

Question 48

Stock of personal wealth

Answer 48

Property/share investment

Question 49

Expectations

Answer 49

Positive or negative feelings about the future state of the economy