MAC Flashcards
(54 cards)
What is economic growth?
An increase in the output of goods and services in an economy, measured by rising GDP.
How is economic growth measured?
Using increases in Gross Domestic Product (GDP).
What are limitations of GDP as a measure of growth?
It does not account for:
- Distribution of income
- Environmental impact
- Quality of goods and services
- Non-market activities
What does the economic cycle diagram show?
The stages of boom, downturn, recession, and recovery, annotated to show how they relate to growth, inflation, and unemployment.
How does each stage of the economic cycle affect growth, inflation, and unemployment?
Boom: High growth, inflation rises, unemployment falls
Downturn: Growth slows, inflation may rise or fall, unemployment rises
Recession: Negative growth, high unemployment
Recovery: Growth resumes, unemployment falls, inflation stabilizes
What are the impacts of economic growth?
Increased employment, higher standards of living, reduction in poverty, greater productive potential, possible increase in inflation, environmental degradation.
What is low and stable inflation?
When prices increase slowly and predictably, avoiding rapid inflation or deflation.
What is inflation?
A sustained rise in the general price level.
What is deflation?
A sustained decrease in the general price level.
How is inflation measured?
Using the Consumer Price Index (CPI).
What are the types of inflation?
Demand-pull: Excess demand pulls prices up
Cost-push: Rising costs of production push prices higher.
How are inflation and interest rates related?
Generally, higher inflation leads to higher interest rates set by central banks to control inflation.
What are the impacts of inflation?
Rising prices and wages, reduced competitiveness of exports, increased unemployment (menu costs, shoe leather costs), uncertainty affecting confidence and investment.
What is low unemployment?
When a high proportion of the labor force is willing and able to work at prevailing wages.
How is unemployment measured?
Using the International Labour Organization (ILO) measure.
What are the types of unemployment?
Cyclical: Due to economic downturns
Structural: Mismatch of skills and jobs
Seasonal: Due to seasonal demand patterns
Voluntary: When workers choose to remain unemployed
Frictional: Short-term unemployment while switching jobs.
What are the impacts of unemployment?
Lower output and productivity, increased poverty, higher government spending on benefits, reduced tax revenue, lower consumer and business confidence.
What is the current account?
Part of the balance of payments recording trade in goods and services, income, and transfers.
What are current account deficits and surpluses?
Deficit: Imports > exports
Surplus: Exports > imports.
What causes deficits or surpluses?
Factors like product quality, prices, and exchange rates.
What are the impacts of a current account deficit?
Leakage from the economy, potential inflation abroad, low demand for exports, difficulties in funding foreign reserves.
How do businesses damage the environment?
Through visual, noise, air, and water pollution.
How can the government protect the environment?
Via taxation, subsidies, regulation, fines, pollution permits, and providing parks.
What is income inequality?
Unequal distribution of income within a society.
