Intro to Macro Flashcards
AD, AS multiplier CFOI (17 cards)
What is AD?
total expenditure on domestically produced goods and services by 4 broad groups of economy. [ C I G X-M]
C is…
spending by households on goods and services w exception of purchase of new housing
I is…
spending by firms on capital goods such as plants inventory stock of raw materials aand unsold goods
G is…
spending by govt on consumer g&s
X-M is…
spending by foreigners on domestically produced g&s - spending by local HH, firms and govt on foreign produced g&s
factors affecting C:
3 factors
- expectation of future price level / income
- interest rate
- govt policy (tax/subsidies）
factors affecting I:
(4 factors)
- interest rate
- cost of capital goods
- business expectations (bullish/bearish)
- govt policy
factors affecting G:
2 factors
- objectives of govt
- state of economy
factors affecting X:
- level of national income of major trading partners
- relative inflation rates
- exchange rates
AS is…
vol of g&s produced within an economy at a given price level
factors affecting AS:
(5)
- change in COP
- change in producer tax and services
- quantity of FOP
- improvement in quality of FOP
- investment in infrastructure
outward/inward (leftright) shift in AS is a…
rise/fall in productivity
upward/downward (updown) shift in AS is a…
rise/fall in COP
what is multiplier effect
when a change in autonomous spending brings about a more than proportional change in national income
2 factors that affect Multiplier effect
- size of multiplier
- degree of resource utilisation
what are the withdrawals in CFOI
STM
savings, taxes, imports
what are the injections into the CFOI
IGX
investment, govt spending, exports
