15th March Cycle Test Revision (Part Of Unit 3) Flashcards
(21 cards)
GDP (Gross domestic product)
The aggregate value of all goods and services produced in a country over time
GNI (Gross national income)
The aggregate income earned by a countries residents, including abroad income, minus income earned by foreigners within the country
Real GDP
It measures a countries total economic output, which is their GDP, taking price changes into account wether they’re due to inflation or deflation
Real GNI
GNI but taking price changes into account, wether it’s due to inflation or deflation.
Short Run
This is the period of time when factors of production are fixed, such as land or visitor capacity, meaning they can’t change the maximum capacity.
Long run
The period of time when all factors of production are variable, which shifts from the short run as factors of production have now been changed
Aggregate demand (C+I+G (X-M))
Total demand for all goods and services in an economy at a given price level, shown by the formula AD = C + I + G (X - M). Consumption, Investment, Government spending, Exports, Imports.
Aggregate Supply
Total output of goods and services that firms in an economy are willing and able to produce/supply at a given price level
What causes movement along the demand curve?
Price
Circular flow of income exchanges
The circular flow of income shows households consume and pay for goods and services, which generates income for firms. Firms produce goods and services which households consume. The people in the households are workers and they provide capital, laboour, land and enterprise for firms. The firms then give the workers payment, wether it’s wages, profit, rent or
Interest. Households then spend that payment on goods and services and the cycle goes on.
The economic cycle
Shows Real GDP over time
Positive output gap
First stage of the economic cycle, when the economy is producing beyond sustainable capacity, leads to inflation and risk of over inflation.
Negative output gap
The second stage of the economic cycle, when the economy is producing below its capacity, making less revenue than they potentially could be
Boom
The third stage of the economic cycle, when economic hrowth is at its highest, as well as high consumer spending, high business investment, low unemployment levels and wage rises. If demand gets too high it can lead to inflation.
Slowdown
The fourth stage of the economic cycle, when economic growth is declining, consumer confidence falls, there’s increased unemployment and less firms are expanding
Recession
The fifth stage in the economic cycle, when there’s little economic growth, high unemployment, low demand and decreasing wages
Recovery
The sixth stage in the economic cycle, when economic growth gradually starts to increase and inflation falls, consumers can start to spend more again.
Macro economics
The part of economics that studies the behavior and performance of an economy as a whole
Trend line
Average growth in the long run
Causes of shifts in AD
- income changes
- confidence
- interest rates
- taxation
- household debt
- investment
- government spending
- exports vs imports
Causes of shift in SRAS
- wages
- fixed costs
- raw materials
- indirect taxes
- exchange rates
