Revision for Tsk 5 Flashcards
households are owners of productive resources (land, labor, capital and overseas) and the buyer of final goods+services.
Firms are employers of resoruces and produce all goods+services in an economy.
When is quilbobirium
∑O = ∑Y = ∑E
This equality known as macroeconomic equilibrium
Full equol.librium circular flow
left side = right side
S+T+I=G+I+X
GDP DEF
GDP IS THE PERSSITNET AND APPREHESABLE RISE OF PRICE OF GOOODS AND SERVICE OVER A PERIOD OF TIME
gdp formula
GDP = C + I + G + (X - M)
Determinants of aggregate consumption:
a) Disposable income b) Household wealth c) Consumer expectations d) Government policies
2 TYPES OF PRODUCTS FOR CONSUMPTION +EG
DURABLE AND NONDURABLE -EG DURABLE CAR, HOUSE NON DURABLE IS FOOD
3 MAIN CATEGORIES OF INVESTMENT
- Business investment – spending by firms on equipment, buildings and construction
- Residential investment – spending by households on new houses & apartments
- Inventories – changes to a firm’s inventories (stocks of unsold goods).
2 MAIN CATEGORIES OF GOV EXPENDITUE
CURRENT AND CAPITAL
Determinants of aggregate consumption:
a) Rate of interest b) Real rate of interest c) Business expectations d) Government policies
WHAT IS CAPITAL EXPNDITURE
spending by the government on infrastructure and other capital goods such as new roads, schools and hospitals
WHAT IS CURRENT EXPENDITURE
government spending on goods & services including salaries of government employees
TRANSFER PAYMETN ADN Y THEY AINT PART OF GDP
GOV SPENDING ON UNEMPLOYMENT AND PPESNION DONT COUNT IN GDP
AGGREGATE EXPENDITURE FORMULA
AE= C + I + G + (X-M)
DETERMNANTS OF NET EXPORTS
- Exchange rate
- Terms of Trade
WHAT DOES APF SHOW
economic model that describes the relationship betweentotal output(usually measured as real GDP) and the inputs used in production
DETERMNATS OF ECONOMIC GROWTNH
POPULATION
PARTCIPATION RATE
PRDOCDUVTIVITYH
LAW OF DIMINISHING RETURNS
the usage of labour increases (and capital remains constant), output will rise, but at a decreasing rate.
INFLATION DEF
Inflation is the persistent and appreciable rise in the general price levels of prices of goods and services
TRIMEED MEAN INFLATION
The top 15% and the bottom 15% of all price movements are “trimmed away” and removed from the inflation calculation. This removes the impact of the smallest and largest price changes
WEIGHTED MEAN INFLATION
The inflation rate is calculated based on the price change of the item that is at the middle of all of the price changes in the CPI basket.
REAL INCOME DEF
our income adjusted for inflation. For real income to increase, your wage has to grow at a faster rate than inflation.
