Topic 1 - What is Macro? Flashcards
1
Q
What is macroeconomics
A
- The study of an economy as a whole
2
Q
What sub-models to macro models rely on
A
- Consumers, Firms, Gov
- Financial, Non-Financial sectors
- Short run, Long run
3
Q
What is the purpose of economic research
A
- To design models of the economy
- Establish which models are useful
4
Q
How are macro models tested
A
- Tested on data
- Rejected if predictions are incorrect
- Rejection of incorrect models is falsification
5
Q
What is the purpose of national accounts
A
- Record macro transactions / data
- Blue Book is UKs NA
6
Q
What are the 4 main components of a national account
A
- GDP
- Consumption
- Fiscal Deficit
- Trade Balance
7
Q
What is GDP
A
- Gross Domestic Product
- The market value of the final goods and services produced in a country in a given time period
8
Q
What are the two main approaches for calculating GDP
A
- The expenditure approach
- The income approach
9
Q
What is the expenditure approach for calculating GDP
A
- GDP = C + I + G + X - M
10
Q
What is included in Gross Domestic Income
A
- Compensation of employees
- Gross operating surplus
- MIxed Income
11
Q
What is the Income approach for calculating GDP
A
- GDP = GDI + Indirect taxes less subsidies
12
Q
What is the difference between nomial and real GDP
A
- Nomial GDP accounts for inflation where Real GDP does not
13
Q
How do we strip out inflation when calculating Real GDP
A
- We value goods and services using a base year as a reference
- P is fixed over time
14
Q
What are the limitations of GDP
A
- Ignores Household production and underground economic activity
- Also missing life expectancy, environment, human rights etc
15
Q
Give two alternatives to GDP
A
- Human Development Index (HDI)
- Social Progress Index (SPI)
