Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

A LEVEL ECONOMICS > THEME 2, National Income (2.4) > Flashcards

THEME 2, National Income (2.4) Flashcards

1
Q

What is income?

A
  • Income is a flow concept
  • Income flows in and out again
  • Earned by all 4 factors of production
  • Wages, rent, interest, profit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is wealth?

A
  • Wealth is a stock concept
  • If we don’t spend all of our income we can build a stock of wealth
  • Savings, shares, property, bonds and pensions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How can wealth generate income?

A
  • If you have a second property you can rent it out for income
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are injections in to the economy?

A
  • Money put into the circular flow of income
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are leakages in to the economy?

A
  • When money is removed from the circular flow of income
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Examples of injections in to the Economy

A
  • GOVt spending
  • Investment
  • Exports
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Examples of leakages from Economy

A
  • Taxes
  • Savings
  • Imports
  • Marginal propensity for money to be withdrawn
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What happens when the sum of injections is greater than the sum of leakages?

A
  • The economy will grow
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What happens when the sum of injections is smaller than the sum of leakages?

A
  • Economy will shrink
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What happens to injections and withdrawals in equilibrium?

A
  • Injections and withdrawals must be equal
  • National income remains the same
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are macroeconomic objectives?

A
  • Economic growth
  • Low unemployment
  • Low and stable rate of inflation (ideally 2%)
  • Balance of payment equilibrium on current account
  • Protection of the environment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the multiplier ratio?

A
  • The numerical value that represents how much total national income (or GDP) will increase as a result of an initial injection of spending into the economy.
  • Amplified effect of an initial change in spending
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the formula for the multiplier ratio?

A
  • K = 1/(1-MPC)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How to calculate MPC?

A
  • MPC = 1 - (MPS+MPT+MPM)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is MPC?

A
  • MARGINAL PROPENSITY TO CONSUME
  • The proportion of additional income that is spent on consumption.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What does a higher MPC lead to?

A
  • A larger multiplier because more income is spent.
17
Q

What does it mean when MPC equals 0?

A
  • All additional income is saved
18
Q

What does it mean when MPC equals 1?

A
  • All additional income is spent
19
Q

What is MPS?

A
  • MARGINAL PROPESNITY TO SAVE
20
Q

What is MPT?

A
  • MARGINAL PROPENSITY TO TAX
21
Q

What is MPM?

A
  • MARGINAL PROPENSITY TO IMPORT
22
Q

Define interest rate.

A

Cost of borrowing money, expressed as a percentage of the amount borrowed

23
Q

What is spare capacity?

A
  • When the economy is not at full capacity with all factors of production
  • It is inside the PPF
  • Negative output gap

A LEVEL ECONOMICS (21 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions