bac Flashcards
(29 cards)
How does the State influence economic and social life?
Through taxation, subsidies, public goods provision, and regulation.
Implements fiscal policies to stabilize the economy. Ensures equity via welfare programs, social security, and redistribution.
How does the EU influence economic and social life?
Sets trade and competition rules, environmental standards.
Funds regional development through the EU budget (e.g., CAP, cohesion funds).
Promotes labor mobility and economic convergence via the Single Market.
CAP stands for Common Agricultural Policy.
What are current developments in EU economic policy?
Green Deal and digital transition policies.
Post-COVID recovery funds (e.g., NextGenerationEU).
Fiscal rule debates (e.g., Stability and Growth Pact reform).
Common responses to inflation and supply chain shocks.
What is actual, potential, and forecast economic growth?
Actual: Increase in real GDP over time (observed growth).
Potential: GDP at full employment without inflationary pressure.
Forecast: Estimated future growth based on models and data.
What are the key determinants of economic growth?
- Human Capital: Education, skills, healthcare.
- Physical Capital: Infrastructure, machinery, technology.
- Innovation and R&D
- Institutional quality: Property rights, stable governance.
- Natural resources
- Macroeconomic stability and investment climate.
What are demand-side and supply-side growth policies?
- Demand-side: Increase aggregate demand via public spending or interest rate cuts.
- Supply-side: Increase productivity and potential output via deregulation, tax reform, education.
What are the benefits and costs of economic growth?
- Benefits: Higher income, lower unemployment, improved living standards, tax revenue.
- Costs: Environmental degradation, resource depletion, income inequality, urban congestion.
Sustainability issue: Long-term growth should not compromise environmental or social stability.
What is underdevelopment and how does it contrast with emerging markets?
- Underdevelopment: Persistent poverty, weak infrastructure, high dependency ratios, limited access to global markets.
- Emerging markets: Rapid growth, industrialization, integration into global trade, but still face inequality and volatility.
What are the phases of the economic (business) cycle?
- Expansion: GDP rises, employment increases, inflation may rise.
- Peak: Economy at full capacity, inflation risk high.
- Contraction: GDP falls, unemployment rises.
- Trough: Lowest point; leads to recovery.
What is the Kondratiev cycle?
A long-wave economic cycle (40–60 years) linked to major technological innovations (e.g., steam engine, electricity, internet).
What is the multiplier effect?
Initial increase in spending causes a larger overall increase in national income.
Formula: 1 / (1 - MPC), where MPC = marginal propensity to consume.
What are counter-cyclical fiscal and monetary policies?
- Fiscal: Government spending/taxation to influence demand (e.g., stimulus during recession).
- Monetary: Central bank tools like interest rates or QE to manage inflation and unemployment.
How do these policies affect national debt and the budget deficit?
Expansionary policies increase deficits and public debt short-term.
If growth returns, higher tax revenue may stabilize debt-to-GDP ratio.
How is unemployment defined and measured?
ILO definition: People without a job, actively seeking and available to work.
Eurostat: Harmonized unemployment rate across EU based on labor force surveys.
What are the main types and causes of unemployment?
- Cyclical: Due to downturns in the business cycle.
- Structural: Skills mismatch or geographical immobility.
- Frictional: Short-term, between jobs.
- Seasonal: Agriculture, tourism, etc.
- Classical: Real wages above market equilibrium.
What is the natural rate of unemployment?
The unemployment rate consistent with stable inflation; includes frictional + structural unemployment.
What are employment policies and their goals?
- Supply-side: Education, retraining, labor market flexibility, incentives to work.
- Demand-side: Direct job creation, public investment, wage subsidies.
What are the social and economic consequences of unemployment?
- Social: Poverty, social exclusion, mental health issues.
- Economic: Lower output, lower tax revenue, higher welfare spending, hysteresis effect.
Define inflation and deflation.
- Inflation: Sustained increase in the general price level.
- Deflation: Sustained decrease in the general price level.
How is inflation measured?
Consumer Price Index (CPI): Weighted basket of goods.
Real purchasing power calculated using inflation rates.
What are the types and causes of inflation?
- Demand-pull: Excess demand over supply.
- Cost-push: Rising production costs (e.g., wages, oil).
- Imported inflation: Due to currency depreciation.
- Built-in inflation: Wage-price spiral.
What are the main policies to ensure price stability?
- Monetary policy: ECB interest rates, open market operations, inflation targeting.
- Fiscal discipline: Avoid overheating via prudent government budgets.
What is the Phillips Curve?
Short-run trade-off between inflation and unemployment.
In long-run, no trade-off (vertical curve at natural rate).
What is the Balance of Payments (BoP) and its components?
- Current Account: Trade in goods/services, income, transfers.
- Capital Account: Transfers of assets.
- Financial Account: Investments (FDI, portfolio, reserves).
