Macro Flashcards
5 macroeconomic objectives
1) Stable prices of (2%pa+/-1%)
2) Steady economic growth (2.25%pa)
3) Full employment
4) Favourable Balance of payments
5) A fairer distribution of income and wealth
Conflicting aims
- Unemployment and inflation.
- Economic growth and inflation.
- Economic growth and the balance -of payments.
- Economic growth and inequality
What is inflation?
A general increase in the average price level from one year to the next.
Or
A fall in the value of money from one year to the next.
What is economic growth?
The increase in the potential level of real output that the economy can produce over a period of time.
What is unemployment?
When not all of those who are able and willing to work are currently employed.
What is a balance of payments?
A record of all the currency flows into and out of a country in a particular time period.
What is national income?
National income measures the total value of all the goods and services produced within an economy over a period of time.
What the methods are used to calculate national income?
Income method: -wages -rent -interest Profits/dividends
Expenditure method:
- consumer spending
- investment spending
- government spending
- net exports
Output method:
- primary
- secondary
- tertiary
- quaternary
What is GDP?
The value of total output in an economy over a year
What is GDP per capita?
GDP/population
What is nominal economic growth?
It’s a GDP increase from one year to the next.
(Calculated as a percentage):
change/origional X 100
What is real economic growth?
Nominal economic growth - inflation.
What is the formula for AD?
C+I+G+(X-M)
Where…
C= Consumption I= Business spending (investment) G= Government spending X= Exports M= Imports
What is the demand for labour derived from?
The demand for the goods and services that labour produces.
What is a Government budget?
A statement of planned government income and planned government spending for a financial year.
