Chapter 1: Introduction to macroeconomics Flashcards Preview

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Flashcards in Chapter 1: Introduction to macroeconomics Deck (21)
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1
Q

What relationships does macroeconomics study?

A

Relationships between one country and another.

2
Q

What does the circular flow of income revolve around?

A

The flow of goods and services and factors of production between firms and households.

3
Q

Where will household income go?

A

It could be put aside for future spending, paid to the government in taxation, go towards businesses or be spent on foreign-made goods and services (imports).

4
Q

What are withdrawals?

A

Increases in savings, taxes or imports which reduce the circular flow of income and lead to a multiplied contraction of production.

5
Q

What are injections?

A

Additions to investment, government spending or exports which boosts the circular flow of income and lead to a multiplied expansion of output.

6
Q

When is an economy in equilibrium?

A

When the rate of injections = the rate of withdrawals from the circular flow.

7
Q

What happens when the economy contracts and there is a recession?

A

GDP declines and there is unemployment.

8
Q

What happens if the economy grows too quickly?

A

We risk the danger of rising inflation and balance of payment difficulties.

9
Q

What are the seven macroeconomic goals?

A

High and sustainable economic growth, full employment, low and stable inflation, a reduced current account deficit, an improved distribution of income, a reduced budget deficit and national debt and a reduced level of environmental degradation.

10
Q

Economic growth:

A

Maintain a steady rate of growth of real national output i.e. real GDP.

11
Q

Low unemployment:

A

Maintain a low rate of unemployment in the labour market.

12
Q

Low inflation:

A

Maintain a low rate of price inflation i.e. the annual % change in the price level.

13
Q

Current account equilibrium:

A

Maintain a balance in the trade of goods and services and net flows of investment income

14
Q

A less unequal distribution of income:

A

Work towards a fairer, but not necessarily equal, share of income to be distributed to all members within the economy in an attempt to reduce the inequality and extreme unfairness which presently exists.

15
Q

Protection of the environment:

A

This is about protecting the natural environment on individual, organisational or governmental levels, for the benefit of the natural environment and future generations.

16
Q

How does money get from firms to households?

A

Through factor payments such as wages and dividends.

17
Q

How does money get from households to firms?

A

Through the consumption of domestically produced goods and services.

18
Q

What are injections?

A

Money entering the circular flow of income - this involves spending on domestic goods and services which comes from outside the circular flow.

19
Q

What are withdrawals?

A

Money leaving the circular flow of income and it involves the part of our income which is not spent on domestic goods and services.

20
Q

What is another word for withdrawals?

A

Leakages

21
Q

What does the scope of macroeconomics include?

A

Looking at the success and failure of government policies.