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Economics 12 > Exam Vocab > Flashcards

Exam Vocab Flashcards

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1
Q

Circular Flow of Income Model

A

A model showing the flow of resources from consumers (households) to firms, and the flow of products from firms to consumers, as well as money flows consisting of consumers’ income arising from the sale of their resources and firms’ revenue arising from the sale of the product.

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2
Q

Closed Economy

A

An economy that has no international trade (no income and exports); usually appears in connection with economic theories and models as virtually no economy in the real world is a closed economy

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3
Q

Rent

A

A payment per unit of time, to the owners of the land resources

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4
Q

Wages

A

A payment per unit of time, to those who provide labour; this includes all wages and salaries

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5
Q

Interest

A

A payment per unit of time, for the use of borrowed money (borrowers pay interest, lenders receive interest)

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6
Q

Profit

A

A payment per unit of time, to owners of entrepreneurship/management (a factor of production)

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7
Q

Income Flow

A

In the simple circular flow of income model, refers to the flow of incomr of households that they recieve by selling their factors of production (resources) to firms; the income flow is equal to the expenditure flow and the value of output flow

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8
Q

Expenditure flow

A

In the simple circular flow of income model, refers to the flow of income of households that they recieve by selling their factors of production (resources) to firms; the expenditure flow is equal to the income flow and the value of output flow

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9
Q

Circular Flow of Income

A

Shows that at any given time period, the value of output produced in an economy is equal to the total income generated in producing that output, which is equal to the expenditures made to purchase that output

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10
Q

Value of output flow

A

In the circular flow of income model, refers to the value of output that is sold by firms and purchased by consumers, which is equal to the expenditure flow and the income flow

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11
Q

Injections

A

In the circular flow of income model, refers to the entry into income flow of funds corresponding to investment, government spending or exports

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12
Q

Leakages

A

In the circular flow of income model, refers to the withdrawal from the income flow of funds corresponding to savings, taxes or imports; also known as ‘withdrawals’

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13
Q

Open Economy

A

An economy that HAS international trade; (imports and exports) usually appears in connection with economic theories and models as virtually all economies in the real world are open economies (to varying degrees)

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14
Q

National Income

A

The total income of an economy, often used interchanably with the value of aggregate output, particularly in the context of macroeconomic models (such as AD-AS)

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15
Q

Expenditure approach

A

A method used to measure the value of aggregate output of an economy, it is equivalent to measurement by the income approach and the output approach

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16
Q

Income Approach

A

A method used to measure the value of aggregate output of an economy, it is equivalent to measurement by the expenditure approach and the output approach

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17
Q

Output Approach

A

A method used to measure the value of aggregate output within an economy, it is equivalent to measurement by the expenditure approach and the income approach

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18
Q

Consumption

A

Spending by households (consumers) on goods and services (excludes spending on households)

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19
Q

Investment

A

Includes spending by firms or the government on capital goods

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20
Q

Government Spending

A

Spending undertaken by the government, as part of its fiscal policy or as part of an effort to meet particular economic and social objectives (such as provision of subsidies, provision of public goods etc)

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21
Q

Net exports

A

Refers to the value of exports minus the value of imports

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22
Q

Gross Domestic Product (GDP)

A

A measure of the value of aggregate output of an economy, it is the market value of all final goods and services produced within a country during a given time period. it is a commonly used measure of the value of aggregate output

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23
Q

Gross National Income (GNI)

A

A measure of total income recieved by the residents of a country, equal to the balue of all final goods and services produced by the factos of production supplied by the country’s residents regardless od where the factors are located; GNI=GDP plus income from abroad minus income sent abroad.

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24
Q

Nominal Value

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A

Value that is in money terms, measured in terms of prices that prevail at the time of measurement, and that does not account for changes in the price level

25
Real Value
Value that has elimated the influence of changes in the price level
26
Nominal GDP
Gross domestic product measured in terms of current (or nominal) process, which are prices prevailing at the time of measurement. Does not account for changes in the price level; to be distinguished from rGDP
27
rGDP
GDP measured in constant prices, ie prices that prevail over one year, called a "base year;" this is useful for making comparisons of changes in GDP over time that have taken into account the influence of changing prices
28
Per Capita
Per person, or per head. For example, GDP per captia is the total GDP divided by the number of people in the population
29
National Income Statistics
Statistical data used to measure an economy's national income and output as well as other measures of economic preformance
30
Green GDP
GDP which as been adjusted to take into account environmental destruction and/or health consequences of environmental problems
31
Recession
An economic contraction, where there is falling rGDP (negative growth) and increasing unemployment of resources lasting 6 months or more
32
Long-term growth trend
In the business cycle diagram, refers to the line that runs through the business cycle curve, representing average growth over long periods of time; shows how output grows over time when cyclical fluctuations are ironed out. The output represent by the long-term growth trend is known as potential output
33
Economic Growth
Increases in quantity of output produced over a period of time and is usually expressed as a percentage in rGDP or percentage in total capital in GDP per capita
34
Decrease in GDP vs decrease in GDP growth
Fall in the value of output produced vs falling rates of growth
35
Business Cycle
Fluctuations in the growth of real output, consisting of alternating periods of expansion and contraction
36
Expansion (BC)
- Positive growth in rGDP - Employment of resources increases - General price level of economy beings to rise more rapidly
37
Peak (BC)
- max real GDP - end of expansion - economy experiences inflation
38
Contraction (BC)
- Falling GDP - IF MORE THAN 6 MONTHS recession - growing unemployment of resources
39
Trough (BC)
- Minimum GDP - End of contraction - Widespread employment
40
Potential Output
The level of output that can be produced when there is "full employment," meaning that UE is equal to the natural rate of UE
41
Macroeconomic Objectives
- Stable - Low UE - Distribution of wealth - Balance of payments - Low levels of inflation
42
Aggregate demand
total quantity of aggregate output, or rGDP, that all buyers in an economy want to buy at different possible price levels, certus paribus
43
Aggregate demand curve
the relationship between aggregate output buyers want to buy and the economy level
44
3 Reasons Why Aggregate Demand is downward sloping
1) wealth effect 2) savings and interest 3) foreign exchange rate
45
Calculating GDP
``` C+I+G+(X-M) Consumer demand Business demand Government Demand X-M demand for spending for exports - demand for imports ```
46
Changes in consumer spending arising from
/ in consumer confidence / in interest rates / in wealth
47
Changes in investment spending
/ in business confidence / in interest rates / in technology
48
Changes in government spending
/ in political priorities | / in economic priorities meant to influence aggregate demand
49
Changes in (X-M)
/ in national income abroad / in exchange rate / in trade protection
50
Short run aggregate supply
Period of time during which the prices of resources, particularly the prices of labour, do not change
51
Long run aggregate supply
Time period when prices of resources change along with changes in PL
52
Aggregate supply
Total quantity of goods and services produced in an economy over a period of time at different price levels
53
SRAS
Relationship between PL and quantity of real output produced by firms when resource prices do not change
54
Assumption of SRAS
Increase in price will eventually lead to an increase in input Therefore it is uncertain as to whether the economy will supply more GDP as the price level increases
55
Equilibrium level of output
Where AD and AS intersect and determines the PL, the level of rGDP and the level of unemployment
56
3 Positions for Short-Run Equilibrium
Recessionary Inflationary Full Employment level of rGDP
57
Recessionary (deflationary) gap
- Less than potential - UE > natural rate - Insufficient AD
58
Inflationary Gap
- rGDP>Yp | - UE
59
Full employment level of output
When the economy is at its full employment equilibirum level of GDP, the AD curve intersects the SRAS curve at the level of potential GDP

Economics 12 (6 decks)

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