Brainscape's Knowledge GenomeTM

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


See full index

AS Econ Macro > Oct test 1 > Flashcards

Oct test 1 Flashcards

1
Q

What is GDP

A

Gross Domestic Product

The total value of the output of goods and services over a year period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Difference between GDP and Economic growth

A

Economic growth = the change in GDP (+ or -)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is an injection

A

Money entering the circular flow of income

- spending from outside the economy into it (e.g. gov spending)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a leakage

A

Money leaving the circular flow of income

- part of our income which isn’t spent on domestic goods and services (e.g. savings)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How do you get GNI

A

GDP + income from citizens abroad - income by foreigners living in the country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the GNI

A

Expenditure
Income
Output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

3 Injection examples

A

Investment
Government spending
Exports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

3 Leakage example

A

Savings
Tax
Imports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Inflation definition

A

The rise in general prices in an economy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is Nominal GDP

A

The face value of GDP, unadjusted for inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is Real GDP

A

GDP adjusted for inflation. E.g. if the NGDP has grown 2% and prices have risen 2% the real GDP has not gone up

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are nominal figures

A

Figures expressed in current prices and represent the value of good and services produces

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are real figures

A

Figures that are adjusted for inflation, so the figures are expressed in constant prices and represent the volume of goods and services produced

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What 3 items are excluded from GDP

A
  • Transfer payments (grants and benefits)
  • Private transfers of money from one individual to another (pocket money or selling old car)
  • Hidden economy (drugs and prostitution)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

GNI (gross national income) VS GNP (gross national product)

A 
GNI = GDP plus wages, salaries, and property income of the country's residents earned abroad.
GNP = reports how much is earned by the country's citizens and businesses, no matter where it is spent in the world
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Actual vs potential economic growth

A 
Actual = increase in real GDP
Potential = increase in the productive capacity of an economy (how much an economy COULD produce even if it isn’t currently doing so)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

7 characteristics of a boom

A
  • more economic growth
  • more demand
  • less unemployment
  • inflationary pressure (more inflation)
  • Labour skills shortages
  • more confidence in the economy
  • more capital goods investment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

7 characteristics of a recession

A
  • less economic growth
  • less demand
  • more unemployment
  • no inflationary pressure (more inflation)
  • Labour skills excess
  • less confidence in the economy
  • less capital goods investment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is the governments definition of a recession

A

Two quarters of negative economic growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the C in CELL

A

Capital

E.g. tools, machinery, buildings, computers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the E in CELL

A

Enterprise

E.g. business owners undertake in the pursuit of profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the first L in Cell

A

Labour

E.g. skills of the work force

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is the second L in CELL

A

Land
E.g. all natural resources
Fish, oil, wind

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is economic growth

A

The rate of change of a countries output - measured in GDP

25
Q

Why is economic growth and objective (6)

A 
Job creation
Rising incomes
Improved living standards
Confidence in economy
Less spent on benefits 
Tax revenue will increase
26
Q

Why is unemployment bad?

6

A

It represents a waste of resources

Less economic growth
Bad social impacts
Low productivity 
Lower tax revenue
More poverty
Worse standards of living
27
Q

What is inflation?

and what is it measured in? You

A

The rate of change of average prices in an economy

Measured in: consumer price index (CPI)

28
Q

How much inflation is targeted?

A

Target = 2% increase
+/- 1%
Which allows stability

29
Q

What is a balanced government budget

A

Where expenditure is equal to revenue

30
Q

What is protection of the environment?

A

Government look to develop sustainable future through energy use
The government invest in companies to support this

31
Q

Why is greater income equality admirable

A

It leads to higher levels of economic growth, better living standards for all and a happier society overall

32
Q

What is the current account

A

Value of imports - exports

33
Q

What is the circular flow of income

A

An economic model showing the flow of goods and services, the factor of production and their payments between households and firms within an economy

34
Q

What is meant by a simple closed model (circular flow diagram)

A
  • no foreign trade + no government influence

- only 2 groups: households and firms

35
Q 
What are the factor rewards for:
Land (buildings)
Labour (output)
Capital (investments)
Entrepreneurship
A 
Land = rent
Labour = wages
Capital = interest 
Entrepreneurship = profit
36
Q

What assumptions are made for a simple circular flow model? (4)

A
  • Households spend all their money on goods and services
  • Firms spend all their income on factors of production
  • There is no government
  • There is no foreign trade
37
Q

Is wealth a stock or flow concept?

Is income a stock or flow concept?

A

Wealth = stock concept (assets owned and human wealth(skills))

Income = flow concept (wages, rent, interest)

38
Q

What is the relationship between income and wealth?

A

More income = more wealth

Interest = input of wealth = resulting in more income

39
Q

Impact of investing in capital goods?

A

It means we increase the productivity capacity, so our ppf moves outwards
So in the future more consumer goods can be made

40
Q

Characteristics of a slump (5)

A
  • High unemployment
  • Lots of firms going out of business
  • low demand and inflation
  • low/negative economic growth
  • low confidence in economy
41
Q

Characteristics of a recovery (5)

A
  • Lower unemployment
  • More capital investment
  • higher demand and inflation
  • increased economic growth
  • high confidence in economy
42
Q

What is economic growth

A

An increase in real GDP level

43
Q

What is economic slowdown?

A

A fall in the growth rate of real GDP

- So the level of real GDP continues to rise but at a slow rate

44
Q

What is a recession? (Economic growth)

A

Two consecutive quarters of negative real GDP growth

- So the level of real GDP actually falls

45
Q

Definition of output gap:

A

The difference between the actual GDP and the trend/potential GDP

46
Q

What is a negative output gap:

A

When the actual GDP is less that trend/potential GDP

- Deflation gap

47
Q

What is a positive output gap:

A

When the actual GDP is more that trend/potential GDP

- Inflation gap

48
Q

What is the meaning of potential output?

A

Potential output occurs when the economy is working at full capacity over the long-term

All factors of production are working efficiently

49
Q

How can the economy be working above the potential output in the short-term

A

The economy can operate above the potential output in the short-term but the pressure on factors of production such as labour means it is unsustainable

50
Q

Why is the output gap difficult to measure?(2)

A
  • It is hard to measure aggregate demand and aggregate supply
  • Potential output is based on estimates of the CELL factors of production (which could be inaccurate)
51
Q

Relationship between GDP and living standards;

A

More GDP = better living standards

52
Q

What do we need to be careful about when measuring living standards against GDP?

A

GDP per capita = total GDP/population

Only one measure of living standards

53
Q

Problems of comparing GDP between developed and developing countries?
(4)

A
  • Accuracy of statistics can vary
  • often developing countries consume what they produce
  • developed countries often increase incomes at expense of quality of life
  • developing countries might wish to achieve growth at the expense of health and safety
54
Q

What is GNP

A

The value of good and services over a period of time by citizens of a country both domestically and overseas

55
Q

Problems with comparing GDP over time? (5)

A
  • population change
  • quality of goods not considered
  • defence related expenditure
  • externalities are not considered
  • income distribution is worse
56
Q

Problems with comparing GDP between countries? (6)

A
  • adjust for population
  • income distribution
  • accuracy of figures
  • spending on defence
  • other living standards
  • some goods are made and sold internally
57
Q

What is meant by PPP (our having power parities)

A

Ppp is an exchange rate

With the 2 identical baskets

58
Q

What does ppp reflect

A

The cost of living

59
Q

What is the easterlin paradox?

A

The idea that when the average wealth of people increase their happiness does not increase

AS Econ Macro (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions