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Economics > MACRO - Unit 8 > Flashcards

MACRO - Unit 8 Flashcards

1
Q

What is the economic growth short run?

A

the actual annual percentage change in real national output

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2
Q

What is the economic growth long run?

A

an increase in the potential productive capacity of the economy

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3
Q

How is short run economic growth measured?

A
  • the annual percentage change in Real National Output

- Gross Domestic Product (GDP)

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4
Q

How is long run economic growth measured?

A

The maximum potential output of the economy using all factor resources as illustrated on the Production Possibility Frontier.

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5
Q

What is the primary cause of an increase in economic growth in the short run?

A

increase in aggregate demand

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6
Q

What has to happen for an increase in long run economic growth?

A

increase in the productive capacity of the economy

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7
Q

What does economic cycle mean?

A

variations in the level of productive capacity of an economy over time.

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8
Q

What does GDP mean?

A

the value of goods and services produced in the economy over a period of time

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9
Q

What is a boom characterised by?

A
  • high rate of economic growth
  • high demand
  • low unemployment
  • inflationary pressure
  • labour skills shortages
  • high confidence in the economy
  • capital Investment is high
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10
Q

What is a recession characterised by?

A
  • demand falls
  • unemployment begins to rise
  • some firms will go out of business
  • confidence in the economy is low and most firms will
    reduce investment
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11
Q

What is a slump characterised by?

A
  • low or negative growth
  • demand and inflation are low
  • unemployment is high
  • confidence in the economy is low
  • high rate of bankruptcy
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12
Q

What is a recovery characterised by?

A
  • economic growth starts to rise
  • demand increases
    Unemployment falls
    Inflation starts to rise
    Confidence in the economy increases
    Capital Investment increases
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13
Q

What is an output gap?

A

the difference between actual GDP and potential GDP

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14
Q

What might cause unexpected changes in the economic cycle?

A

demand-side shocks

supply-side shocks

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15
Q

What is a demand-side shock?

A

unexpected changes in the economy that directly impact on aggregate demand

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16
Q

What is a supply-side shock?

A

unexpected changes in the economy that directly impact on aggregate supply

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17
Q

What are the 2 measurements for unemployment?

A

claimant count

labour force survey

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18
Q

What is claimant count?

A

number of people claiming Job Seekers Allowance

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19
Q

What is labour force survey ?

A

survey studying the employment circumstances of the UK population

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20
Q

What will unemployment have consequences?

A

the economy
business
the unemployed

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21
Q

What are the consequences of unemployment for the economy?

A

lost output
increased government spending
lost tax revenue

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22
Q

What are the consequences of unemployment for a business?

A
  • reduced productivity
  • reduced profitability
  • less incentive to invest
  • reduced morale and productivity of remaining workforce
23
Q

What are the consequences of unemployment for the unemployed?

A 
lower living standards
social costs
financial costs
de-skilling
reduced chances of finding work
24
Q

What are the types of unemployment?

A

cyclical
frictional
technical
seasonal

25
Q

What are the types of unemployment?

A 
cyclical
frictional
technological
seasonal
structural
regional
26
Q

What is frictional unemployment?

A

occurs as workers move between jobs

27
Q

What is seasonal unemployment?

A

when workers are unemployed at different times of the year

28
Q

What is stuctural unemployment?

A

occurs when long term shifts in the structure of the economy impact upon the job market

29
Q

What is regional unemployment?

A

occurs when unemployment occurs within particular regions, due to different sets wanted

30
Q

What is technological unemployment?

A

occurs when improved capital, is more productive and efficient than labour, so replaces labour

31
Q

What does inflation mean?

A

the rate of change in the average price level over time

32
Q

What are the 2 ways to measure inflation?

A

CPI

RPI

33
Q

What is the basket goods?

A

represent typical purchases in UK, each item has different weightings relative to their importance of effect if priced changed

34
Q

What are the 2 primary causes of inflation?

A

demand-pull

cost-push

35
Q

What is demand-pull inflation?

A

caused by excessive demand in the economy for goods and services

36
Q

What is demand-pull inflation?

A

caused by excessive demand in the economy for goods and services

37
Q

What are the causes of demand-pull inflation?

A
  • reduced taxation
  • lower interest rates
  • rise in consumer spending
  • weak exchange rate
38
Q

What is cost-push inflation?

A

occurs when firms respond to rising costs of production by increasing prices

39
Q

What are the causes of cost-push inflation?

A
  • wage increases
  • higher raw material costs
  • higher taxes
  • higher import prices
  • natural disasters
40
Q

What is deflation?

A

decrease in the general price level at a slower rate

41
Q

What are the problems with deflation?

A
  • consumers tend to delay purchasing decision
  • consumption slows significantly
  • firms will lose the confidence to invest
42
Q

What is the balance of payments on current account?

A

a record of a country’s trade/transactions with the rest of the world

43
Q

What are the 3 sections of balance of payments?

A

current account
financial account
capital account

44
Q

What is a surplus?

A

export > import

45
Q

What is a deficit?

A

import > export

46
Q

What measures the net exports of visible goods?

A

trade in goods

47
Q

Why does the UK have a large deficit on trade in goods?

A
  • an increase in the demand for consumer goods, many of which are imports
  • decline in the UK manufacturing sector
  • lower production of primary materials such as gas and oil
48
Q

What measures the net exports of invisible goods?

A

trade in services

49
Q

What is investment income?

A

generated by UK owned overseas assets

50
Q

What are transfers?

A

payments made (or received), usually by the government, to or from other countries

51
Q

What are the factors which influence a country’s current account balance?

A
  • inflation
  • improving productivity
  • strong exchange rate
  • economic activity in other countries
52
Q

When does a positive negative gap occur?

A

when actual output is above the trend rate

53
Q

What can the approach to reconciling conflicts can be split into?

A

keynesian

monetarists

54
Q

What are 2 differences between keynesian a and monetarists?

A

Keynesian :

  • no crowding out
  • in recessions government should intervene

Monetarists:

  • government spending crowds out private sector investment
  • economy is stable and markets work efficiently with little intervention

Economics (9 decks)

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