Module 13 Macroeconomics and Government Policy Flashcards
1
Q
Four macroeconomic objectives
A
- Economic growth
- Low unemployment
- Low inflation
- Avodance of balance of payments deficits and exchange rate problems
2
Q
Aggreate demand and supply curves
A
3
Q
Gross Domestic Product
A
The sum of the market values of all the goods and services produced in an economy during a period.
4
Q
Circular Flow of Income Assumtion
A
- Economy consists of only two sectors, firms and households.
5
Q
4 factors of production
A
- Land - natrual resources
- Labour - workers who provide their skill
- Capital - man made inputs such as plant and machinary
- Enterprise - organisiton of the other three factors
6
Q
A
7
Q
Saving and investments
A
- Withdrawal of fund from the economy
- Injection of fund into the economy
8
Q
Imports and exports effect on the economy
A
- Imports are withdrawals from the circular flow
- Exports are injections.
9
Q
Effect of goverment spending e.g healthcare and tax such as VAT on the circular flow
A
- Government spending is an injection
- Taxes are withdrawals from the cirular flow
10
Q
Trade surplus
A
Exports > Imports
11
Q
Trade deficit
A
Exports < Imports
12
Q
Budget deficit
A
Government spending > Taxation
13
Q
Budget Surplus
A
Government spending < Taxation
14
Q
Aggregate demand
A
Aggregate Demand = Consumer spending + Investment + Government spending + Exports - Imports
15
Q
Consumption function
A
C = a + bY
- C is the amount consumed for any level of income
- a is autonomous consumption, the amount that a person will consume if their income is zero
- b is the marginal propensity to consume
- Y is income (Income = Savings + Consumption)
