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Content Flashcards

(45 cards)

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1
Q

General Glut

A

An excess of supply or an excess in general

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2
Q

Marginal Propensity to consume

A

Proportion of an increase in income spent

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3
Q

4 areas of government Spending

A

Current Spending (Maintaining public servies)
Capital Spending (Infrastructure)
Welfare Spending (Benefits, pensions etc)
Debt Interest Payments

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4
Q

Say’s Law

A

The belief in an economy’s ability to right itself. “aggregate demand creates aggregate supply”

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5
Q

Economic Growth

A

An increase in the productive capacity of the economy

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6
Q

Inflation

A

Sustained rise in the general price level

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7
Q

Deflation

A

Sustained fall in the general price level

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8
Q

Disinflation

A

A fall in the rate at which prices rise

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9
Q

Core Inflation

A

Inflation measured with the most volatile prices (e.g. food and energy)

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10
Q

Costs of Inflation

A

Menu Costs
- updating things

Shoe Leather Costs - time spent checking chsnges in prices

International Competitiveness
Redeistributive Costs - inflation erdoes the value of money / debt and reduces real interest rates so savers are worse off but borrowers are better off

Psychological costs - makes people feel worse off

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11
Q

Characteristics of a good tax

A

Leads to the least loss in effecieny

Compatability (with other countries)

Diversity (gov revenue should come from a variety of source

Flexibility (automatically adjusts to the price level)

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12
Q

What do direct taxes shift

A

Aggregate Demand

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13
Q

What do indirect taxes shift

A

SRAS

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14
Q

What is Council Tax?

A

Tax on domestic property owned

Households with only one person are entitled to a 25% discount

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15
Q

What are automatic stabalisers?
Give example.

A

A factor that changes to stabalise AD and the economic cycle
E.G.
If in a recession, more people will seek JSA preventing income from falling below a certain threshold, maintaining ability to consumer and preventing AD falling further

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16
Q

Discretionary fiscal policy

A

Gov makes a conscious decision to change taxes or gov spending

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17
Q

Function of Money

A

1) Medium of exchange / payments
2) store of value
3) unit of account
4) A standard of deferred payment

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18
Q

4 types of money supply

A

1) Narrow Money
2) Broad Money
3) Sight Deposit
4) Time deposit

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19
Q

3 types of financial markets

Study These Flashcards
A

1) Money Market
2) Capital Market
3) Foreign Exchange Market

20
Q

2 types of FOREX Markets

Study These Flashcards
A

1) Spot Market - exchange happens immediately
2) Forward Markets - exchange happens at some specified time in the future.

21
Q

Objectives of a commerical bank

Study These Flashcards
A

Profitibility
Liquidity
Security

22
Q

Equation of Money Multiplier

Study These Flashcards
A

1 / reserve requirement

23
Q

The transmission mechanism of Interest Rates

Study These Flashcards
A

Change in base rate leads to:
1) Expectations / confidence
2) Asset prices
3) Commercial Rate
4) Exchange Rate

This leads to change in:
Domestic demand
Net External Demand

which leads to change in Total demand which leads to inflation.
Exchange rates lead to changes in import prices that again lead to inflation

24
Q

Forward Guidance

Study These Flashcards
A

Sending signals to financial markets about the future direction of conventioanl monetary policy to minimise uncertainty

25
Quantity theory of money equation
MV = PQ
26
Regulatory bodies of the financial system under the back of england
FPC - Financial Policy Committe PRA - Prudential Regulation Authority
27
Regulatory bodies of the financial system NOT under the back of england
FCA - financial conduct authority
28
What does the FPC do?
MacroPrudential - identifies and monitors risk to the overall stability of the financial system and acting to remove the risks
29
What is the role of the PRA and FCA?
Both: Microprudential - focus on ensuring stability of individual banks and financial institutiond - identifying, monitoring and acting on the risks PRA - regulates and supervises individual banks and other financial institutions. Does stress tests FCA - promotes competitionand ensures onsumers get a fair deal
30
Absolute Advantage
when a country produces more of one good or services compared to another country, both with the same factors of production
31
Comparative Advantage
When a country specialises in producing a good or service where they have a lower opportunity cost compared to another country
32
Trade creation vs Trade Diversion
Creation - When a country moves from buying from a high-cost country to a low cost one. Diversion - when a country moves from buying from a low-cost country to a high cost one.
33
What is included in the capital account?
Transfer of ownership with nothing in return Sale of non-produced, non-financial assets e.g. intellectual property like patents
34
Correcting a current account deficit
Devaluation - weakening currency (selling more pounds) Deflation (not actually deflating) - expenditure reducing or supply side policy Direct Controls
35
Marshall Learner Condition
PED for imports + PED for exports > 1 (ignoring any negative signs)
36
HDI
Human Development Index Based on: life expectancy at birth, expected years of schooling, national income per head closer to 1 - more developed
37
ISEW
Index for sustainable economic welfare calculated the same way as GDP but includes things like housework and capital formation, and makes deductions of source depletion
38
Recardian Equivalence
consumers are forward thinking and they realise that an increase in the budget deficit will mean an increase in taxation in the futureso they start to save
39
Liquidity Trap
a situtation where using conventional monetary policy doesn't work because: as rates gets closer to 0, it is difficult to cut them further If interest rates go below average, consumers expect them to rise again in future during recessions, business/consumer confidence is too low to spend or take on debt
40
What causes the short run phillips curve to shift
Supply side shocks
41
What is stagflation
Rising inflation and unemployment
42
Voluntary vs involuntary unemployment
Volunatry - where there are vacancies available but workers do not take them as they are holding out for better py or conditions Involuntary - when workers are unable to find a job due to circumstances beyond their control, usually associated with cyclical unemployment
43
Hysteresis
A reduction in long-run productive capacity as a result of skills lost during unemployment
44
Non-accelerating inflation rate of unemployment (NAIRU)
the lowest unemployment rate that can be sustained without causing wages growth and inflation to rise
45
Types of financial market failure
Speculation and market bubbles Assymetric information Moral Hazard Negative externalities Market rigging

Economics Macro (2 decks)

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