Flashcards in Intro to macroecons HAVEN'T ADDED MULTIPLIER SECTION Deck (13)
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1
What are the 4 sectors (stakeholders) in an economy?
Households (domestic)
Firms (domestic)
Government (domestic)
Foreign (foreign hhs, firms & gov)
2
Definition of injections
Refers to any payment of income to domestic firms that do not arise from domestic households, but are additional spending generated by other sectors of the ecy.
3
What do injections into an economy come in the forms of?
Exports (X revenue)
- dom firms earn revenue from hhs, firms and govs in other ctys through exports.
Investment
- acquisition of new capital gds. creates revenue for dom firms that manufacture capital equipment
Government expenditure
- govs purchase g&s from firms; and also need to spend on the wages of civil servants
4
Definition of withdrawals
also known as Leakages,
Refers to any part of a household's income that is not spent on domestically-produced g&s, but leaves the circular flow of income.
5
What do withdrawals from an economy come in the forms of?
Imports (M expenditure)
- hhs buy g&s from abroad
Net savings
- some of hhs' Ys are saved
Net taxes
- compulsory payments to the gov not for gds provided or services rendered
6
What is AD?
Refers to the quantity of domestically-produced g&s that hhs, firms, gov and foreigners are w&a to buy at each possible GPL
Written as
AD = Cd + Id + Gd + Xd
or
AD = C + I + G + (X-M)
7
Determinants of consumer expenditure
- Income (Y-induced C)
- Wealth
- Taxes and transfers
----> disposable Y is the earnedY minus direct taxes and transfers
- Expectations of future prices and Y
- Cost and availability of credit
- Distribution of income
8
Determinants of investment
investment = fixed capital formation + changes in inventories
- Business confidence and expectations
- Gov policies
- Costs and efficiency of capital equipment
- Cost and availability of credit
*Recall MEI & its graph*
9
Determinants of government expenditure
- For macroeconomic stabilisation
- For sustained and sustainable growth
- Gov SPENDING for social objectives (e.g. merit and public gds)
----> gov SPENDING can be classified as:
(i) gov exp on final g&s [which consists of gov consumption exp e.g. payment of civil servants; and gov investment e.g. construction of new highway, etc.
(ii) transfer payments [which shows up as Cd in the circular flow]
10
Determinants of net exports
- Foreign Y & Dom Y
- Relative prices [depending on i/r & exr)
- T&Ps
- Gov policies
11
What is AS?
Refers to the quantity of domestically-produced g&s that firms are w&a to supply at each possible GPL
Curve:
Keynesian range (horizontal)
Intermediate range (upward-sloping)
Classical range (vertical)
12
Determinants of AS
- uCOP: affects AS in SR
- Factor Q&Q : affects AS in LR
13
