Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Economics > Macroeconomics > Flashcards

Macroeconomics Flashcards

1
Q

What are the 4 main microeconomic indicators

A

Rate of economic growth
Rate of inflation
Level of unemployment
State of the balance of payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

GDP

A

Change in national output over a period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Purchasing Power Parity meaning

A

The real value of an amount of money in terms of what you can actually buy with it. Exchanging the rate f money to US dollars

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

When and why is PPP used

A

When using GDP to compare living standards in countries that use different currencies,the exchange rate may not reflect the true worth of the 2 currencies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Limitations with GDP

A

Hidden economies
Public spending may vary
Income inequality
Negative externalities ignored

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is nominal GDP

A

Value of national output at current prices with no adjustment for the effects of inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Real GDP

A

Value of output adjusted for inflation and measured at constant prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Limitations with GDP/capita

A

Influence of foreign companies included but money is sent back to the country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

2 meanings of inflation

A

The rise in average price of goods and services over a period of time
Fall in the value of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is retail price index

A

Measurement used for inflation
2 surveys carried out
1st survey sent to 6000 households called living costs and food survey
Used to find out what people spend their money on and proportion of income spent to work out the relative weighing
2nd survey based on prices - measures change in price of basket of good
Price changes multipiled by weighings from 1st survey

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is counsumer price index

A 
Same as RPI but : 
Mortgage intrest payments
Council tax
Larger sample of population used for the CPI
Mainly used
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Limitations of RPI and CPI

A

excludes all households in the top 4% incomes
Information given by households in living costs and food survey may be inaccurate
Basket of goods only changes once a year - might miss short term changes in spending habit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

why is RPI and CPI important for governments

A

Deciding on increases in state pension and other welfare benefits
Used to measure UKs international competition - higher CPI means UK goods become less price competitive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

unemployment definition

A

people out of work as a percentage of labour force

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the 2 ways to measure unemployment

A

The claimant court

The labour force survey

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the claimant court

A

Number of people claiming unemployment-related benefits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Advantages of claimant court

A

Data easy to obtain

Updated monthly, always current

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Disadvantages of claimant court

A

Excludes people who are looking for work but aren’t eligible to claim benefits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the labour force survey

A

ILO uses a sample of a population and asks them if they are actively seeking work.Used to produce ILO unemployment count

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Advantages of labour force survey

A

International agreed measure for unemployment - easier comparison

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Disadvantages of the labour force survey

A

Expensive to collect

May be unrepresentative of the population

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Affects of unemployment to the economy

A

Leads to lower income
less spending
companies sell fewer goods or need to cut prices and make less profit
Unused labour in the economy so fewer goods produced

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is balance of paymets

A

Refers to international flow of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What does the current account do

A

Records international exchange of goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
4 sections to the current account
Trade-in goods called 'visible trades' Trade-in services 'invisible trades' International flows of income earned as salaries, interest, profit and dividends Transfers of money from one person or government to another
26
What is surplus
Money flowing in exceeds money flowing out
27
What is deficit
Money flowing out exceeds money flowing in | Shows a country as uncompetitive
28
Why is there deficeit in the current account
As consumer spending increases,so does our demand for imported goods Exhange rate is too strong - makes our exports less competitive
29
What is balance of paymets
Refers to international flow of money
30
What does the current account do
Records international exchange of goods and services
31
3 sections to the balance of payments
The Current Account The Financial Account The Capital Account
32
What is surplus
Money flowing in exceeds money flowing out
33
What is deficit
Money flowing out exceeds money flowing in | Shows a country as uncompetitive
34
Why is there deficeit in the current account
high propensity to consume imported goods, Exhange rate is too strong - makes our exports less competitive UK firms have become less competitive in the manufacture of goods.
35
What do injections do
come in the form of investment and government spending going directly into the firm and exports.
36
what do withdrawals do
Come in the form of imports, savings and taxes made by households and firms and import
37
What is aggregate demand
Total spending on goods and services
38
AD formula
Consumption+ Investment + Government spending + (exports - import)
39
What is consumption
Told amount spent by households on goods and services. Doesn't include firms
40
Factors of consumption
``` Income Intrest rates - higher,less consumption Wealth effect Tax Unemployment Consumer confidence - eg in a recession,ppl scared to lose their job ```
41
What is investment
Money spent by firms on assets which they'll use to produce goods and services
42
Factors of investment
Risk eg economic instablitly ,less investment Government incentives and regulation Interest rate and access to credit Buisness confidence and animal spirits
43
What is government spending
Money spent by the government on public goods and services
44
What is GNP
value of all goods and services produced by domestic businesses both at home and abroad, so it includes overseas assets
45
What is GNI
the total level of income
46
Causes of inflation
demand-pull - excessive demand cost-push - firms respond to rising costs of production by increasing prices to protect profit margins growth of the money supply - measure of the amount or the stock of money in the economy
47
Causes of demand-pull inflation
Reduced taxation Lower interest rates A weak exchange rate - boost export
48
Causes of cost pull inflation
Wage increases Higher raw material costs Higher taxes
49
Deflation meaning
the decrease in the general price level
50
Disinflation meaning
when the inflation rate is positive but falling
51
Causes of unemployment
structural unemployment frictional unemployment - as workers move between jobs seasonal unemployment demand deficiency cyclical unemployment real wage inflexibility - real wage rates increase
52
Effects of unemployment
Lower living standards Social costs - increase in illness De-Skilling
53
Why is there a large surplus of trade in services in the UK
the shift towards tertiary sector employment, thus specialising in the provision of services More competitive in services
54
How can the current account of balanced
Controlling consumer spending will reduce the demand for imports. Investing in the supply-side
55
AD equation
C + I + G + (X-M)
56
Factors affecting consumption (6)
``` interest rates consumer confidence wealth effects Disposable income Interest rates Personal debts ```
57
Marginal propensity to consume/save
how likely an individual is to consume or | save an extra £1 of income they receive
58
Influences on investment
The rate of economic growth - faster, sooner capital equipment wears out Keynes and ‘animal spirits’ Demand for exports - encourage firms to invest in capital assets Access to credit
59
Main influences on governemt expenditure
the trade cycle | fiscal policy
60
Factors influencing LRAS (5)
``` technological advances changes in relative productivity changes in education and skills - productivity inhanced changes in government regulations competition policy ```
61
What is short run supply
all factors of production are fixed, with the exception of labour which can be hired to cover increases in aggregate demand
62
Factors influencing SRAS
changes in costs of raw materials and energy changes in exchange rates - makes purchasing raw materials cheaper changes in tax rates
63
What does a closed economy assume
No foreign trade No government influence Only households and firms
64
Describe the circular flow of income
Firms provide households with goods and services Households spend their income on the goods and services produced by firms Households also provide firms with factors of production: Land, Labour, Capital & Entrepreneurship In order to pay for these factor services, firms pay households rent, wages, interest and profit
65
What does a circular flow of income assume
Households spend all their income on goods and services Firms spend all their income on factors of production There is no government There is no foreign trade
66
How does increase in income impact wealth?
An increase in income will have a direct impact on wealth, providing finance for investment Investing in the productive capacity of the economy will increase the stock of physical assets, therefore increasing wealth This will lead to economic growth and higher income in the future
67
Net transfer meaning
Sum of payments made and received with no good or service in exchange
68
Problem with supply side policies
Time lag | Effectiveness of education depends on quality of education
69
Net transfer meaning
Current transfers between residents and non residents | Not in exchange for anything
70
What demand side policy did the government put during the financial crisis
VAT cut to 2.5%
71
Gov debt connection to budget deficit
Government borrows to fund budget deficit | Borrowing leads to higher levels of government debt

Economics (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions