Pack 1: Economic Growth Flashcards
What are macroeconomic objectives?
Aims/targets of government to improve economic welfare
What are the main macro objectives?
~Economic growth
~Low unemployment
~Low/stable inflation
~balanced government budget
~balance of payments equilibrium on current account
~Greater income equality
~Environment protection
What are the policy tools governments can use to achieve objectives?
~Fiscal policy
~monetary policy
~Supply side policies
What is income?
Flow of money, acts as reward for services of factors of production. e.g. wages
What is wealth?
Stock of assets held by individual/organisation. e.g. shares/properties
What is the circular flow of income?
Model of economy showing money flows between households/firms.
Consumption/income flow as financial flows for factors of production and goods/services.
What are injections into the circular flow?
~Government spending
~Investment
~Exports
What are withdrawals from the circular flow?
~Taxation
~savings
~Imports
What is the multiplier effect?
Number of times rise in incomes exceeds rise in injections which caused it
What is the multiplier ratio?
Ratio of change in equilibrium real income to injection that brought it
What can cause a multiplier effect?
~Investment increases
~Government spending
~Export increases
What will limit the multiplier effect?
Withdrawals from the circular flow
What is the MPC?
Proportion of additional income spent
What is the MPW?
Proportion of additional income withdrawn from circular flow. Tax, savings, imports.
What is national income?
Total value a countries final output of all goods/services produced in one year