Intro to Macroeconomics And National Income Accounting Flashcards
(91 cards)
Macroeconomics
Is the study of the structure and performance of national economies and policies government use to try to affect economic performance.
Issues macroeconomists address include;
- What determines a nation’s long-run economic growth?
- Why does a nation’s economic activities flactuate?
- What causes unemployment
- What causes prices to rise
- How does being part of the global economic system affect nations’ economy
- Can government policies be used to improve a nation’s economic performance?
Average labor productivity
The amount of output produced per unit of labor input.
Business Cycle
This refers to the short-run, but sometimes sharp contractions and expansions in economic activity.
Recession
The downward phase of a business cycle during which national output may be falling or perhaps growing only very slowly
Unemployment rate
The number of unemployed divided by the total labor force [the number of people working or seeking work]
Open economy
Is the type of economy that has extensive trading and financial relationships with other national economies
Trade surplus
When export exceeds import
Trade deficit
When import exceeds export
Macroeconomic policies [2]
- Fiscal Policy
2. Monetary Policy
Fiscal Policy
Fiscal Policy is determined at the national, state, and local levels and is concerned about government spending and taxation.
Monetary Policy
Determines the rate of growth of the nation’s money supply and is under the control of a government institution known as the central bank
Aggregation
Aggregation is the process of summing individual economic variables [aggregate consumption, aggregate investment] to obtain economic-wide totals.
Economic theory
Is a set of ideas about the economy that has been organized in a logical framework
Economic model
A simplified description of some aspect of the economy, usually expressed in a mathematical form
Gross Domestic Product
Is the market value of goods and services newly produced within a fixed period of time, within the geographical boundaries of a country.
The Classical Approach
The principle of the Classical approach is based on two assumptions : people pursue their own economic self interests and that prices adjust reasonably quickly to achieve equilibrium in all markets. This is largely due to the “invisible hand” proposed by Adam Smith.
Keynesian Approach
The keynesian approach, named after the proponent, John Maynard Keynes, holds that prices of goods and services or demand and supply doesn’t adjust rapidly as in classical approach, thus to solve the problem of imbalance, government must buy more which in turn will result in a high demand of labor.
National Income Accounting
The measurement of production, income, and expenditure.
National Income Accounts
These are accounting frameworks used in measuring current economic activity.
National Income accounts are measured in terms of;
- The amount of output produced, excluding output used up in intermediate stages of production [the product approach]
- The income received by the producers of out [the income approach]
- The amount of spending by the ultimate purchasers of output [the expenditure approach]
The Product Approach [2*]
Measures economic activities by adding the market values of goods and services newly produced, excluding any goods and services used up in intermediate stages of production.
The product approach measures economic activities by summing the value added by producers.
Value Added Concept.
The value added concept of any producer refers to the its output minus the value of input purchased from other producers.
Capital Good
Is a type of final good that is itself produced [which rules out natural resources such as land] and is used to produce other goods; however unlike intermediate goods, capital goods are not used in the same period that it is produced.
