Booklet One Flashcards

1
Q

what are the three methods of calculating the level of economic activity in the economy?

A

The output method - calculated by adding up the goods and services produced
The expenditure method - add together all the money spent by households in the economy
The income method - The amount firms pay households for the factors of production

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2
Q

what can we assume in a closed economy?

A

output ≡ expenditure ≡ income

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3
Q

what is the circular flow of income model?

A

illustrates how money and resources move through the economy the model assumes a closed economy, meaning there is no international trade.

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4
Q

What is income?

A

income is a flow variable - it is generated or received over time such as a salary

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5
Q

what is wealth?

A

wealth is a stock variable - the value of assets someone has at a given time

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6
Q

what factors of incomes are associated with the factors of production?

A

the factor income for capital is interest
the factor income for enterprise is profit
the factor income for land is rent
the factor income for labour is wages

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7
Q

Draw the circular flow of income diagram

A

see camera roll

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8
Q

what are leakages/withdrawal?

A

Money that leaves the circular flow of income

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9
Q

3 examples of leakages/withdrawals

A

.purchases of imports - goods brought from abroad
.taxation
.savings - income not spent

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10
Q

what are injections?

A

Money that enters the circular flow of income from someone other than firms or households

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11
Q

3 examples of injections

A

.sales of export - goods sold abroad
.government spending
.investment - in this sense spending previous spending

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12
Q

What is GDP?

A

the total value of goods and services produced in a country within a year

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13
Q

what are nominal values?

A

nominal values are the actual numerical values that are measured using the current price

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14
Q

what are real values?

A

Real values are taken at constant prices, they are adjusted for inflation

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15
Q

Formula for Index Number

A

Index Number = (Current Year Value/Base Year Value) × 100

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16
Q

what will always be the base year?

A

100

17
Q

What are the 4 main macroeconomics objectives?

A

.sustainable economic growth
.price stability (low inflation)
.Minimising unemployment
.stable balance of payments on current accounts

18
Q

State 3 other possible macroeconomics objectives

A

.maintain a balanced budget
.achieve greater equality in the distribution of incomes
.protect the environment