macro term 1

Question 1

closed economy

Answer 1

has no foreign trade/no government

Question 2

households own wealth as…

Answer 2

factors of production

Question 3

household supply these factors to firms for

Answer 3

• rent
• wages
• interest
• profits (dividends)

Question 4

national output

Answer 4

value of the flow of good sand services to households

Question 5

national expenditure

Answer 5

value of spending by households on goods and services

Question 6

national income

Answer 6

value of income paid by firms to households in return for land , labour and capital

Question 7

examples of injections

Answer 7

• investment
• gov spending
• exports

Question 8

examples of withdrawals

Answer 8

• saving
• taxes
• imports

Question 9

what does the economy need to equal to reach a state pf equilibrium

Answer 9

the rate of withdrawals = rate of injections

Question 10

how does national output occur

Answer 10

if their are net injections into the economy

Question 11

what happens if there is a contraction of production

Answer 11

net withdrawals

Question 12

investment

Answer 12

spending by firms on capital equipment and stock

Question 13

exports

Answer 13

goods and services form the UK sold to foreigners

Question 14

gov spending

Answer 14

on schools, hospitals, investments

Question 15

saving

Answer 15

money not spent

Question 16

taxes

Answer 16

from income, profits

Question 17

imports

Answer 17

products and services bought from other countries

Question 18

What is the circular flow of income?

Answer 18

The circular flow of income is an economic model that illustrates the movement of money, goods, and services between households and firms in an economy.

Question 19

True or False: In the circular flow model, households provide factors of production to firms.

Answer 19

True

Question 20

Fill in the blank: In the circular flow of income, firms pay _____ to households for the use of their resources.

Answer 20

wages

Question 21

Which of the following is NOT a component of the circular flow of income?
A) Households
B) Government
C) Foreign Investment
D) Weather

Answer 21

D) Weather

Question 22

What role does the government play in the circular flow of income?

Answer 22

The government collects taxes from households and firms and provides public goods and services, influencing the flow of income.

Question 23

where does gov borrow money from

Answer 23

national debt is borrowed and is eventually paid back which is ultimately paid back by tax payers

Question 24

what is a gilt

Answer 24

it is a government bond which allows the gov to loan money in exchange for an agreed upon interest rate

Question 25

who are gilts mainly bought by

Answer 25

- financial institution; pension/investment funds - banks - insurance companies

Question 26

what happens to gilts when the national debt increases

Answer 26

the gov has to pay more on al the bonds it has sold

Question 27

how much of the yearly spending is on debt

Answer 27

10%

Question 28

aggregate demand formula

Answer 28

C+I+G+(X-M)

Question 29

aggregate supply

Answer 29

the total quantity of goods and services that producers in an economy are willing and able to supply at a given price level

Question 30

what does AS show

Answer 30

the availability of an economy to produce goods and services and shows the relationship between the Real GDP and the average price levels

Question 31

AS curve elasticity

Answer 31

relatively elastic upward sloping because higher process make output more profitable and business can expand production

Question 32

shifts for SRAS

Answer 32

WERPT -Wage rates -Exchange rates -Raw material -Productivity -Taxation

Question 33

what is classical LRAS elasticity

Answer 33

perfectly inelastic

Question 34

LRAS

Answer 34

is the productive potential of the economy the total real output of all firms at a given price, no. of workers, levels of productivity

Question 35

factors shifting LRAS

Answer 35

Q2CELL Quantity and Quality of - Capital - Enterprise -Land -Labour

Question 36

examples of LRAS

Answer 36

migration and gov regulations can increase labour force and productive potential technological advances increases volume of goods and services produced and education/skill means more output and workers

Question 37

demand side shock

Answer 37

unexpected change that shifts AD

Question 38

supply side shock

Answer 38

unexpected change that shifts SRAS

Question 39

examples of demand side shocks

Answer 39

- house market bubble burst - stock market crashes - sharp rise of taxes or interest rates -world economy goes into recession - reduced gov. spending - covid

Question 40

examples of supply side shocks

Answer 40

- large rise in commodity prices - trade union wage increases - sharp fall in oil and commodity prices - covid

Question 41

negative output gap occurs

Answer 41

after a recession when their is sparce capacity in the economy as not all resources are being used up

Question 42

appreciation in value of pound

Answer 42

SPICED Imports cheaper; shifts AS outward Exports dearer; shifts AD inward

Question 43

how do cheaper Imports cause AS to shift outward

Answer 43

the cost of production for domestic businesses, allowing them to supply more goods and services at each price level

Question 44

currency depreciation effect on AS

Answer 44

WPIDEC weaker pound imports dearer exports cheaper cost increases of imported components and raw material which decreases AS