Macro AS Flashcards
(84 cards)
5 macroeconomic objectives
stable prices (2% +/- 1% inflation) steady economic growth (2.25% pa.) full employment, favorable balance of payments fairer distribution of wealth and income
aggregate demand
total spending in an economy
policy conflicts between the macroeconomic objectives
economic growth vs 2%inflation, unemployment vs 2%inflation, economic growth vs fairer distribution of income and wealth, economic growth vs balance of payments
total spending=
total income=total output
inflation
a general increase in the average price level from one year to the next
unemployment
when not all those who are willing and able to work are employed
balance of payments
a record of all the currency flows into and out of a country in a given time period
economic growth
the increase in the potential level of real output the economy can produce over a period of time
3 ways to calculate national income
income method: wages+rent+interest+profits/dividends, expenditure method: C+I+G+(X-M) output method: primary+secondary+tertiary+Quaternary
national income
measures the total value of goods and services produced within the economy over a period of time
GDP
the total output (goods and services) in an economy in on year
GDP per capita
the total output (goods and services) in an economy in on year divided by polultaion
nominal economic growth
% increase in GDP from one year to the next
real economic growth
% increase in GDP from one year to the next adjusted for inflation
injections and withdrawals in the circular flow of inocome
injections: exports(x), government spending(G), investment(I). Withdrawals: imports(M), savings(S), taxation(T)
macroeconomic consumption function
AD=C+I+G(X-M)
the demand for labor…
is derived from the demand for the goods and services that labor produces
aggregate demand
total level of planned real expenditure on domestically produced goods and servides
aggregate demand curve
shows the level of planned demand for real output consistent with a particular price level
money government spends comes from
taxes but is mostly borrowed creates a deficit and opportunity cost
austerity
policy that tries to reduce deficit -> creates a neutral/ balanced budget
factors that affect consumption
tax rates, consumer confidence, inflation expectations, interest rates, stage of economic cycle
factors that affect investment
availability of spare capacity, stage of economic cycle, business confidence, interest rates
factors that affect government spending
tax revenue, stage of economic cycle, size of public sector, government priorities