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macroeconomics > Pack 1: Economic Growth > Flashcards

Pack 1: Economic Growth Flashcards

1
Q

What are macroeconomic objectives?

A

Aims/targets of government to improve economic welfare

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2
Q

What are the main macro objectives?

A

~Economic growth
~Low unemployment
~Low/stable inflation
~balanced government budget
~balance of payments equilibrium on current account
~Greater income equality
~Environment protection

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3
Q

What are the policy tools governments can use to achieve objectives?

A

~Fiscal policy
~monetary policy
~Supply side policies

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4
Q

What is income?

A

Flow of money, acts as reward for services of factors of production. e.g. wages

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5
Q

What is wealth?

A

Stock of assets held by individual/organisation. e.g. shares/properties

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6
Q

What is the circular flow of income?

A

Model of economy showing money flows between households/firms.

Consumption/income flow as financial flows for factors of production and goods/services.

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7
Q

What are injections into the circular flow?

A

~Government spending
~Investment
~Exports

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8
Q

What are withdrawals from the circular flow?

A

~Taxation
~savings
~Imports

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9
Q

What is the multiplier effect?

A

Number of times rise in incomes exceeds rise in injections which caused it

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10
Q

What is the multiplier ratio?

A

Ratio of change in equilibrium real income to injection that brought it

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11
Q

What can cause a multiplier effect?

A

~Investment increases
~Government spending
~Export increases

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12
Q

What will limit the multiplier effect?

A

Withdrawals from the circular flow

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13
Q

What is the MPC?

A

Proportion of additional income spent

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14
Q

What is the MPW?

A

Proportion of additional income withdrawn from circular flow. Tax, savings, imports.

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15
Q

What is national income?

A

Total value a countries final output of all goods/services produced in one year

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16
Q

What is gross domestic product?

A

Value of all goods/services produced in economy over year

17
Q

What is gross national income?

A

Value of all goods/services produced in economy over year within national borders, plus net income from production abroad.

18
Q

What is nominal GDP?

A

GDP, unadjusted for inflation

19
Q

What is real GDP?

A

GDP adjusted for inflation

20
Q

What is GDP per capita?

A

GDP divided by total population in economy

21
Q

What is purchasing power parity, (PPP)?

A

Exchange rate between currencies comparing price of typical basket of goods between the countries

22
Q

What are the limitations of using GDP to compare living standards?

A

~Statistical issues
~Inequality issues
~No quality of life measure

23
Q

What is economic growth?

A

Increase in real GDP over time

24
Q

What is actual growth?

A

Increase in real GDP in economy over time

25
Q

What is potential growth?

A

Increase in productive potential of economy over time

26
Q

What factors can lead to actual growth?

A

~Up investment
~Down savings
~Up budget deficit
~Down trade deficit

27
Q

What factors can increase potential growth?

A

~Capital good investment
~Tech advancements
~Healthcare/education improvements

28
Q

What is an output gap?

A

Difference between actual GDP level and productive potential of economy

29
Q

What is the business/trade cycle?

A

Phenomenon where GDP fluctuates around underlying trend, following regular pattern

30
Q

What is an economic boom?

A

GDP well above productive potential/long-term trend rate of growth

31
Q

What is a recession?

A

GDP falling two or more consecutive quarters

32
Q

What is subjective happiness?

A

Feelings of wellness/satisfaction, cannot be objectively measured

33
Q

What factors affect subjective happiness?

A

~Financial situation
~Job satisfaction
~Friends, family, community
~Health
~Personal freedom
~Personal values

34
Q

What is the Easterlin paradox?

A

Shows relationship between real incomes and subjective happiness

35
Q

Why does subjective happiness plateau?

A

~Up importance of non-financial factors
~Importance of relative incomes
~Importance of habit

36
Q

What is UK national wellbeing?

A

Economic measure of quality of life. Conducted by ONS, attempts to look beyond GDP, includes, health, environment, personal well-being

37
Q

What are the limitations of national well-being stats?

A

~Subjective factors, hard to measure
~Difficult to compare over time and between measures
~Measure not aggregated

macroeconomics (7 decks)

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