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Econ the 3rd > Introduction to Macroeconomics > Flashcards

Introduction to Macroeconomics Flashcards

1
Q

What is the circular flow of income

A

The idea that all money is passed between business and households

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2
Q

What are the 3 methods of measuring the size of the economy

A

Expenditure method
Income method
Output method

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3
Q

What is AD

A

Aggregate demand is the total value of all the goods and services demanded in an economy

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4
Q

What are the components of AD

A

C - Consumption
I - Investment
G - Government spending
(X - M) - (Exports - imports)

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5
Q

What are the 3 leakages

A

Taxation
Saving
Imports

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6
Q

What are the 3 injections

A

Consumption
Investment
Government spending

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7
Q

What is consumer confidence

A

How consumer view the state of the economy

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8
Q

Marginal propensity to consume

A

The % of a change in income that is spent

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9
Q

What is used to describe national output

A

AS

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10
Q

Why is it not necessarily a good thing that the economy is in equilibrium

A

Equilibrium can occur at a point where the factors of production are under-utilised

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11
Q

What is the accelerator theory

A

An increase in real GDP will lead to a proportionally higher increase in private sector investment

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12
Q

What is the multiplier effect

A

When an initial change in AD has a greater final effect on the level of equilibrium national income

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13
Q

What does the size of the multiplier depend on

A

The level of leakages from the system

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14
Q

What causes the multiplier

A

Due to the circular distribution of income money is spent multiple times

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15
Q

What is a likely effect of a POG

A

High inflation
Damage to the factors of production

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16
Q

What is the effect of a NOG

A

AD is smaller than it could be

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17
Q

Nominal value

A

Value based only on current value without taking into account how prices change over time

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18
Q

Real value

A

Value of an economic variable taking into account how the price changes through time

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19
Q

GNI

A

gross national income - GDP plus income from abroad

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20
Q

Seasonal adjustment

A

A process by which seasonal fluctuations in a variable are removed to reveal an underlying trend

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21
Q

Productivity

A

The measure of efficiency of a factor of production

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22
Q

Total factor productivity

A

The average productivity of all factors - total output over total input

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23
Q

Human capital

A

The stock of skills that contribute to the efficiency of a worker

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24
Q

Economic cycle

A

A phenomenon by which GDP fluctuates around an underlying trend

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25
What is the equation for the price index
(Nominal GDP / real GDP) * 100
26
Index
A way of comparing the value of a variable with a base observation
27
CPI
Consumer price index - A measure of general prices in the UK
28
CPIH
CPI accounting for house prices
29
RPI
Retail price index
30
Deflation
A fall in price level
31
Disinflation
A fall in the rate of inflation
32
Hyperinflation
Extreme level of inflation
33
Cost push inflation
Inflation caused by an increase in firms costs
34
Demand-pull inflation
Inflation caused by an increase in AD
35
Money stock
The amount of money in the economy
36
Consequences of higher inflation
Increased inequality Falling real income Inefficient allocation of resources Wage inflation - increased costs due to workers asking for more money Uncertainty Menu costs - firms must update prices more regularly
37
Advantages of inflation
The value of governments debt decreases Allows for economic growth
38
Disadvantages of inflation
Causes uncertainty, increasing costs and fiscal drag
39
Fiscal drag
When high inflation causes people to move up tax brackets reducing RDI
40
Employment
People who are working
41
Economically inactive
People who are of working age and are unable to work
42
Discouraged workers
People who are have been unable to find work and are no longer looking for work
43
Workforce
People who are economically active
44
Unemployed
People who are economically active but not employed
45
Full employment
A situation in which everyone who is willing and able to find work is able to do so
46
Claimant count of unemployment
The number of people on JSA
47
JSA
Job-seekers allowance
48
ILO
Measure of how many people are without jobs but are willing and able to work
49
Frictional unemployment
People who are between jobs
50
Structural unemployment
Unemployment due to changes in the economic structure
51
Cyclical unemployment
Unemployment that arises due to changes in the economic cycle
52
Seasonal unemployment
Unemployment that arises during seasons when demand is low
53
Real wage inflexibility
A situation in which minimum wage is higher than the equilibrium wage resulting in excess supply of labour
54
Voluntary unemployment
A situation in which an individual chooses not to work
55
What are the causes of frictional unemployment
Will always exist due to the nature of job searching
56
What causes Structural unemployment
Difficulties learning new skills Difficulty moving regions to find work Changes in economic structure
57
What causes demand deficient unemployment
When the supply of people wanting to work is higher than the demand for workers Often happens when the economy is below full capacity
58
What causes seasonal unemployment
Lack of demand during certain seasons e.g. January
59
What causes wage inflexibility
When wages are pushed above the equilibrium often due to a rise in minium wage
60
Advantages of low unemployment
Means that the long term unemployed decrease—increase in labour FOP Multiplier effect
61
Disadvantages of unemployment
Causes an increase in inflationary pressure Decreases size of labour force
62
balance of payments
A set of accounts showing how transactions are split between residents and other countries
63
Current account
Identifies transactions that dont have return
64
Financial account
account identifying transactions in financial assets between a country and the rest of the world
65
Capital account
Identifies transactions in physical capital
66
Credit
Money flowing into a country from a transaction
67
Debit
Money leaving the account from a transaction
68
Underemployment
Working fewer hours than you would like

Econ the 3rd (12 decks)

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