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Finance > Module 13 > Flashcards

Module 13 Flashcards

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1
Q

What are the four macroeconomic objectives of the govt?

A
  • low inflation
  • high employment
  • economic growth
  • avoidance of BOP deficits and exchange rate problems
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2
Q

What is aggregate demand and supply?

A

total demand supply from individual companies

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3
Q

What is GDP?

A

sum of the market values of all goods and services produced in a period

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4
Q

What are the factors of production?

A
  • capital
  • enterprise
  • land
  • labour
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5
Q

What are the payment/rewards of the factors of production?

A
  • rent
  • salaries
  • profit
  • interest
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6
Q

What are withdrawals from the circular flow?

A
  • savings
  • imports
  • taxes
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7
Q

What are injections to the circular flow?

A
  • exports
  • govt spending
  • investments
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8
Q

What is a balance of payments?

A

different between imports and exports

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9
Q

What is a trade surplus?

A

exports>imports

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10
Q

What is a trade deficit?

A

imports>exports

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11
Q

What is a budget deficit?

A

govt spending> taxes

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12
Q

What is a budget surplus?

A

taxes>govt spending

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13
Q

What is the public sector net cash requirement?

A

the total amount the govt requires to borrow

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14
Q

What is the formula fro aggregate demand?

A

AD=exports + govt spending+ consumer spending + investment - imports

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15
Q

What is the formula for income?

A

income = consumption + savings

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16
Q

What is the consumption function?

A

C = a + bY
C - consumption
a -autonomous consumption
b- MPC

17
Q

What is the marginal propensity to save?

A

MPS= 1- MPC

18
Q

What is the formula for increase in national income due to an injection?

A

=injection * 1/MPS

19
Q

What is frictional unemployment?

A

because of switching jobs and the time it takes to match employees with jobs

20
Q

What us seasonal unemployment?

A

certain times of the year

think farming or tourism

21
Q

What is structural unemployment?

A

where the supply of labour in one industry outstrips demand and poles kills are too inflexible to change industry, can lead to regional unemployment

22
Q

What is classical unemployment?

A

sometimes called real wage unemployment
when the number of workers companies are willing to employ at certain rate is less than demand.
can be due to things that keep wage artificially high i.e. minimum wage or trade unions

23
Q

What id demand deficient unemployment?

A

-often called cyclical or Keynesian

due to low growth or recession and demand curve shifts left

24
Q

What can the govt do to tackle unemployment?

A

use interest rates
geographical subsidies
change minimum or living wage

25
Q

How often is inflation measured?

A

monthly

26
Q

What is the difference between consumer price index and retail price index?

A

CPI doesn’t include council tax or mortgages

27
Q

What are the issues associated with inflation?

A
  • uncertainty
  • savers would be worse off
  • BOP - county’s exports will become more expensive and imports will seem cheaper
28
Q

What is demand pull inflation?

A

When demand increases and firms respond by increasing prices

29
Q

What is cost push inflation?

A

as production costs get more expensive, firms supply fewer goods and prices are raised. this can lead to wage price spiral where workers demand higher wages which then further increase the firms prices.

30
Q

Who sets the inflation target in the UK?

A

UK government sets a target for the Bank of England.

31
Q

What id demand side policy?

A

seek to change the level of spending in the economy

32
Q

What is supply side policy?

A

encouraging firms to produce more

33
Q

What is expansionary fiscal policy?

A

tax cuts and govt spending

34
Q

What is contractionary govt policy?

A

cuts in spending and increasing taxes

35
Q

What are the advantages of fiscal policies?

A
  • resdribute wealth

- alter behaviour

36
Q

What are the diadvantages of fiscal policies?

A

-time lag
-households might not react as anticipated
may increase inflation

37
Q

Who sets interest rates?

A

Bank of England and Monetary Policy committee (members from boe and external experts)

38
Q

What is quantitive easing?

A

BoE creates digital money and buys things like govt bonds which

  1. lowers the bond yield, hence interest rates
  2. frees up investors

Finance (9 decks)

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