Macroeconmics Production Flashcards
Factors of production
Capital
Enterprise
Land
Labour
Define free goods
Unlimited in its supply and availability
= no opportunity cost
Economic goods
Goods or services that has a benefit to society and uses up scarce resources in their production
= degree of scarcity and opportunity cost
Consumer goods
Products intended for immediate consumption or used by individuals
Capital goods
Used by businesses to facilitate production and contribute to economic growth over an extended period
Define PPF
Diagram showing max combinations of goods that can be produced by an economy assuming all resources are fully employed
Define productive efficiency
When max output is produced from available factors of production and when it’s not possible to produce more of one good wo producing less of another
Define circular flow of income model
Movement of spending and income throughout the economy
What happens if there’s more injections
More economic growth
= more ones entering economy
List leakages of flow of income
Savings
Taxation
Imports
List injections of flow of income
Investment
Government spending
Exports
Describe output method
Adding up final value of all goods produced in an economy in a year
Define nominal national income
Total value of earnings produced without adjusting with inflation
Define real national income
Income adjusted for inflation
= more accurate measure of actual purchasing power and changes in standard of living
Importance of real national income measurement
Measures success of an economy
Shows living standards in a country
Allows gov to estimate how much can be collected in taxation
