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Economics A Level > Macroeconomics AS > Flashcards

Macroeconomics AS Flashcards

1
Q

What is the circular flow of income

A

The movement of spending and income throughout the economy

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2
Q

What are the two markets of the CFOI and describe them

A

Factor market - Using household skills to demand resources

Product market - Households demand products from businesses

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3
Q

What are injections and leakages?

A

Injections - Spending that flows back into the economy through government spending, export rev and investment

Leakages - spending that does not flow back from households to firms through imports, taxes or savings

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4
Q

What is the multiplier effect

A

Process by which any change in a component in AD results in a final greater change in GDP

1/1-MPC or 1/MPW. MPW=MPS+MPT+MPM

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5
Q

Immobility of labour

A

Occupational - lack required skill set and training to switch profession therefore out of work

Geographical - Unable to move to another area for work as may have to look after family member, Cost of moving too high or education reasons

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6
Q

Cyclical and Structural unemployment?

A

Cyclical - unemployment caused by a lack of AD

Structural - decline of industries due to changes in demand supply
-Technological - new tech causes redundancies
-Regional - unemployment focused in one geographical area

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7
Q

Frictional and classical unemployment?

A

Classical - Wages driven up to cause surplus of labour

Frictional - Workers between jobs
-Search - spend time unemployed looking for job
-Seasonal - Labour demanded at certain times of year
-Casual - Out of work in between irregular periods of unemployment

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8
Q

Resource function, amenities function and absorber of waste function?

A

Resources - provision of resources for production process, e.g oil, electricity

Amenities - Households get utility from visiting clean places, enjoyment of clean air improves living standards

Absorber of waste function - Environment provides a means to absorb firms and households waste

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9
Q

Support for the resources function

A

More sustainable agriculture
more renewable resources
conservation of ecosystems

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10
Q

Support for the amenities function

A

Stricter littering policies
Reduce sewage in sea
Increase wildlife reserves

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11
Q

Absorber of waste function

A

Reuse
Recycle
Reduce

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12
Q

HDI and its problems

A

HDI - statistic to measure various countries levels of social and economic development

Uses life expectancy from birth, years and expected years of schooling, and GDP per capita

Ignores cultural factors
Ignores pollution
Doesnt measure extent of inequality in gdp per capita

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13
Q

Benefits of economic growth

A

Better standard of living
Higher consumer confidence
Unemployment levels fall
More leisure times
Higher tax = higher g

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14
Q

Problems of economic growth

A

Pollution
Damage to environment
Poor distribution of income
Consumption of demerit goods
Bad sustainability
Stress on labour force

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15
Q

What is economic growth in SR and LR

A

SR - rise in AD or SRAS

LR - Increase in LRAS

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16
Q

Causes of econ growth

A

Rise in demand for exports
Rise in birth rate
Fall in energy costs
Improvements in infrastructure and education
Fall in APS
Increased immigration
Rise in investment

17
Q

APC, MPC, APS, MPS

A

APC/S proportion of income that is saved/consumed

MPC/S proportion of next pound earned that is saved/consumed

formula = consumption/saving / total income

18
Q

The Keynesian LRAS curve
Betwen 0-Y
Y-Yf
Output levels > Yf

A

0-Y - Resources underemployed, more can be supplied without extra costs - Significant Spare Capacity

Y-Yf - Demand for resources rise, so to increase supply, firms will have to pay higher costs so prices rise - Limited Spare Capacity

Output levels > Yf - operating at full capacity (employment) , supply cannot increase regardless of higher price levels - Full Capacity

19
Q

The output gap

A

Output gap - measure of spare capacity available in economy

Actual output < potential output (Yf) = negative output gap
Actual output > potential output (Yf) = positive output gap

Causes of NOB - AD falls, shifts left, or SRAS falls, shifts left

20
Q

Why is classical LRAS vertical

A

All factor markets move to equilibrium in LR
No markets in surplus or shortage in LR
Unemployed workers must accept pay cuts so wages decrease in LR until D=S
So in LR, firms supply max potential output
True at whatever PL

21
Q

Actual output vs potential output

A

Actual output - Output of economy in SR, can be above at or below Yf

Potential output - Maximum output level in the LR, when all factors of production are being utilised

22
Q

What causes shifts in the SRAS

A

Change in costs
Factor productivity
Wage rates
Unit cost
Raw material price
Producer tax/subisides

23
Q

What is in the current account of the BOP

A

Trade in goods/services
Primary income
Secondary income

Capital and financial account

24
Q

How is inflation measured using CPI

A

Identify stable base year to be 100
FES to find out commonly bought items
Shopping basket created
Weights attached to different categories
Weight x new price index = CPI

25
Q

Problems of CPI

A

Improvements in quality may cause price increase

Baskets to not allow for changes in peoples buying habits

26
Q

Unemployment

A

Unemployed - fit and able to work but out of work

Rate of unemployment = unemployment level / labour force x 100

Working age population - population of 15 - 64 year olds, econ active and inactive

Labour force - econ active (unemployed and employed)

Labour force parcipitation rate - econ active/working age pop x 100

27
Q

Cost Plus and Demand Pull Inflation

A

Cost plus - Rising costs force firms to push up their prices to maintain their profit margin.

Demand pull - Too much expenditure leads to a level of demand that cannot be matched by supply, AD rises faster than AS, so firms increase prices to cover rise in costs.

28
Q

Consequences of Unemployment in Economy

A

Less tax revenue
Fall in AD
Fall in demand for imports as lower incomes

29
Q

Consequences of Unemployment for businesses

A

Can hire workers for lower wages
Lost human labour shifts SRAS left
Workers have lower job security so less effective

30
Q

Consequences of unemployment for individuals

A

Depression due to low confidence
Increased poverty means increased crime
Skills will erode therefore less unemployable

31
Q
A

Economics A Level (1 decks)

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