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Economics - Macro > RST BOOK > Flashcards

RST BOOK Flashcards

1
Q

What are the Economic policies/ indicators?

A
  • Economic growth
  • inflation
  • unemployment
  • interest rates
  • exchange rates
  • balance of payments
  • debt
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2
Q

Give examples of injections that come into the economy?

A
  • exports
  • investment
  • government
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3
Q

Examples of withdrawals from an economy?

A

Imports
Taxes
Save

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4
Q

What is true if injections are bigger than withdrawals?

A

Economic growth and vice versa

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5
Q

3 ways that we measure the amount of economic activity going on?

A
  • Output method - measure the value of output produced by firms
  • Expenditure Method - Measure the total expenditure of consumers
  • National Income - Measure of the total income for all firms
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6
Q

What does the circular flow show us?

A

Money is flowing around and the amount changes due to injections and withdrawals

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7
Q

What are the three government policies?

A

Monetary
Fiscal
Supply side

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8
Q

Define a policy

A

A strategy used to achieve certain objectives

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9
Q

What is the fiscal policy?

A

Government spending & taxation

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10
Q

What is monetary policy?

A

Influence the money supply - government uses interest rates to influence the supply of money

  • credit availability (how much you can borrow)
  • Quantitative easing
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11
Q

Why do we measure the economy?

A 
Forecasts 
Record total output
Comparisons 
Plan
Identify problems
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12
Q

Why are our figures sometimes inaccurate?

A
  • unrecorded transactions
  • black market
  • difficult to put a value on some good / services
  • accuracies Of reported figures
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13
Q

What is Aggregate Demand?

A

Total spending on goods & services

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14
Q

What is the Aggregate Demand formula?

A

AD = C + I + G + (X-M)

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15
Q

What does C stand for?

A 
Consumer expenditure on goods and services 
Includes durables (can use over and over again) and non-durables eg food and drink
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16
Q

What is Income?

A

Is wha you get paid

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17
Q

What is Disposable Income?

A

Is income in your bank after tax

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18
Q

What is discretionary income?

A

Is money you spend at your own choice (excluding rent,car insurance etc)

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19
Q

What are the Keynes factors that affect consumption?

A
  • income
  • distribution of Income
  • wealth affect
  • change in expectations
  • demographic factors
  • level of unemployment
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20
Q

Keynes factors that affect consumption - income

A

As income rises or falls, consumptions and spending also rises and falls

21
Q

Keynes factors that affect consumption - Distribution of income

A

Inequality of income

22
Q

Keynes factors that affect consumption - wealth affect

A

Is the Change in spending that accompanies a change in perceived wealth

23
Q

Keynes factors that affect consumption - changes in expectations

A

Individuals may rush to purchase goods in excess of current needs if they expect a war or fear a shortage

24
Q

Keynes factors that affect consumption - demographic factors

A

Large families spend more than small families and demographic changes like age sex occur over a long period.

25
Q

Keynes factors that affect consumption - level of unemployment

A

The more people there are receiving a steady income, the more people there are to make discretionary spending choices

26
Q

What is the Marginal Propensity to Consume?

A

How much additional income people are willing to consume

27
Q

What is the Marginal Propensity to Consume equation?

A

MPC = change is consumed / change in income

28
Q

What is the change in consumption called?

A

Average propensity to consume

29
Q

What is capital investment?

A

Firms buying machines to produce finished goods

30
Q

How much of GDP does investment count for?

A

15-20%

31
Q

What is depreciation?

A

Drop in value of a product that is old and used

32
Q

What factors affect investment levels?

A
  • interest rates (cost of borrowing)
  • Economic Growth (changes in demand)
  • confidence / expectations
  • technological developments (productivity of capital)
  • availability of finance from banks
33
Q

What is the accelerator theory?

A

States that investment is related to the rate of change of GDP

34
Q

Example of accelerator theory

A
  • Increase in consumer demand
  • Firms get close to full capacity
  • firms invest to meet rising demand
35
Q

What is the negative accelerator?

A

We’re a decline in growth leads to a decline in companies investment

36
Q

What is the affect on companies if there is lower corporation tax?

A

Companies have a larger incentive to invest

37
Q

What factors affect investment?

A

Retaining profit affect investment
Government policy affects investment
Government spending & taxation affects investment
Rate of inflation
RISK - Higher risk lower level of investment

38
Q

Where does the government get it’s money from?

A

Business rates £30 bn

National Insurance £334 billion

39
Q

How much is government spending to GDP?

A

Government spending is 50% of GDP

40
Q

What are the three types of Government payments?

A
  • Welfare spending (transfer payments)
  • public services (recurring spending
  • state investment (investment projects)
41
Q

What is the current government spending on public services?

A
  • Salaries of NHS employees
  • Drugs used in healthcare
  • Road maintenance project
42
Q

Government spending on Capital? (New public infrastructure)

A
  • construction of new motorways and bridges
  • new equipment in the NHS
  • Flood defence schemes
43
Q

What is the size of the multiplier If an investment of £10 million grows the economy to £100million?

A

10x

44
Q

How can government spending affect incomes?

A
  • Welfare State Transfer (benefits)
  • Universal Child Benefits / Unemployment benefits
  • Public State Pension
  • Conditional Welfare Transfers
45
Q

What are some state provided services?

A
  • education - reduces in equality of market incomes
  • Health Care
  • social housing
  • employment training
46
Q

What are the UK’s major trade partners)

A
  • Germany
  • US
  • China
47
Q

What are the UK’s main imports?

A
  • Machinery ($82.5 billion)
  • Vehicles ($72.8 billion)
  • Mineral Fuels ($51.8 billion)
48
Q

What are imports?

A

Are products that are brought into a country from another

49
Q

What is the Balance of Payments?

A

Records all financial transactions made between consumer, businesses and the government on one country with others.

Economics - Macro (27 decks)

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