Intro to macroecons HAVEN'T ADDED MULTIPLIER SECTION Flashcards Preview

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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

Factors that affect both AD & AS

Investment
- capital accumulation
- addition to the ecy's stock of physical capital (one of the FOPs)

Gov spending [development expenditure]
- education/training (human capital/skills/pdtivity)