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Econ A Level > Macroeconomic Definitions > Flashcards

Macroeconomic Definitions Flashcards

(55 cards)

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1
Q

Methods of measuring National Income

A

Expenditure, Income and Output method

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2
Q

Expenditure Method

A

Adding up all expenditures made on goods and services during a year

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3
Q

Income Method

A

Sum of 4 different types of income in a year

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4
Q

Output Method ( Value-Added Method )

A

Avoids double counting, taking the final value of all goods and services in a year

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5
Q

Multiplier effect

A

An initial injection into the economy causes a bigger final increase in RGDP

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6
Q

National Income

A

The income earned by factors of production within a country’s economy

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7
Q

Accelerator theory / effect

A

States an increase in GDP will often lead to a proportionally higher increase in the private sector investment ( I )

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8
Q

Formula for Multiplier effect

A

1/1-MPC or 1/MPW, MPS+MPT+MPM are combined to measure total withdrawls ( MPW )

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9
Q

Macroeconomic objectives

A

Stable prices, Full employment, Stable balance of payments, Fairer distribution of income and control government finances

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10
Q

Calculate RGDP from nominal

A

Real GDP = Nominal GDP / Price Index X 100

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11
Q

Gross National Income

A

GNI = GDP + Net Property Income from abroad

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12
Q

HDI

A

Human Development Index : GNI per capita, Mean years of schooling and Life expectancy at birth

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13
Q

Capital flight

A

When the receiving country of FDI stops being useful, the MNC’s may take their resources back out of the economy

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14
Q

Sustainable growth

A

Growth that meets the needs of the present without compromising the ability of future generations to meet their needs ( SDG’s )

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15
Q

Types of Unemployment

A

Frictional, Cyclical ( demand deficient ) and Structural

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16
Q

Frictional unemployment

A

Temporarily out of work due to changing personal circumstances or simply between jobs

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17
Q

Cyclical unemployment

A

Also called “demand deficient”, according to the economic cycle

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18
Q

Structural unemployment

A

Can persist in the long term, two types: Geographical and Occupational immobility.
Geographical - Jobs in different areas which are inaccessible to unemployed
Occupational - Skills are no longer needed

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19
Q

How to measure inflation, explain them

A

CPI ( Consumer Price Index ) and RPI ( Retail Price Index )
CPI - Calculated using an imaginary shopping basket of 750 goods and services
RPI - Includes housing costs
Different categories of items have different weightings

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20
Q

Calculate inflation

A

Using indexes, Change in weight / Original weight X100

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21
Q

Comparative advantage

A

This means a country has a lower opportunity cost of producing a good compared to other goods it could produce, allowing it to specialize in that good and trade for others even if it doesn’t have an absolute advantage in any good.

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22
Q

Absolute advantage

A

This means a country can produce a good using fewer resources than another country, essentially being “better” at producing that good in absolute terms.

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23
Q

Current account

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A

Size of Imports and Exports

24
Q

Financial account

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A

Transactions in financial assets ( e.g. FDI/ moneyflows etc. )

25
Capital account
Transactions in capital ( e.g. patents/ copyrights/ fixed assets )
26
What is equal balance of payments
Current account + Financial Account + Capital Account = 0
27
Primary Income
Income from economic agents including profits from overseas firms e.g. Amazon from UK back to USA
28
Secondary Income
Current transfers, entails money sent overseas ( e.g. gifts, overseas aid, remittances ), no expectation of a service in return
29
( Deliberate ) Fiscal policy
All about Government expenditure and Taxation to influence the AD of an economy ( and achieve macroeconomic objectives )
30
Austrian school
Believes in minimal intervention by the government, arguing the free mearket will achieve macroeconomic objectives
31
Keynesian school
Argues for a much more active degree of government intervention
32
Monetarists
Money supply is the chief determinent in GDP as well as monetary policy tools
33
Monetary policy
Indirect intervention, carried out by the central bank with guidance from the government, using tools such as interest rates to influence AD
34
Supply-Side policy
Government attempts to increase productivity and shift aggregate supply to the right. Target LRAS but may impact SRAS as well
35
Budget
Financial plan, outline of expected spending and expected revenue for the next financial period
36
Progressive tax
Higher earners pay a higher percentage of their income in tax
37
Proportional tax
Everybody pays the same percentage of their income in tax
38
Regressive taxation
Allows higher income groups to pay a lower percentage of income in tax
39
Current government expenditure
Expenses of running a country from day to day. e.g. pay of public sector workers, schools heating and lighting, hospitals medicine etc.
40
Capital government expenditure
Plan for the future, improving the facilities available to the public, just as important as current but easier to delay. e.g. building schools, hospitals, better military equipment tanks ships etc. Part of G spent on investment in infrastructure / long-term needs
41
Public sector net borrowing
Mostly done through selling government bonds, loaning money to the government in return for an agreed rate of interest. Also known as Gilts in the UK or Treasuries in the USA. Low risk investments.
42
Structural deficit
Part of a deficit that is not related to the state of the economy and will not disappear when the economy recovers. Estimated and up to interpretation The economy is strong but the government still runs a budget deficit
43
Cyclical budget deficit
Considers fluctuations in tax revenue and spending due to the economic cycle When a government is forced to run a budget deficit due to a recession
44
Automatic fiscal stabilisers
Automatic changes in the fiscal policy in response to the economic cycle
45
Government's debt rules
Budget deficit should be no larger than 3% of GDP National Debt should not exceed 60% of GDP
46
Crowding out effect
The reduction in private sector investments induced by increased public sector spending
47
Crowding in effect
When higher government spending leads to an increase in private sector investment ( due to the accelerator effect )
48
Laffer curve
Increasing tax rates above a certain level will actually reduce tax revenue because it becomes a disincentive for workers to work or firms to maximise profits
49
What is used in Monetary Policy
Interest rates Quantitative easing The reserve requirement / ratio The exchange rate
50
Monetary policy exchange rates
Central bank purchases and sells its own currency on the open market with the objective of sustaining the level they want utilising their foreign currency reserves
51
Monetary policy liquidity trap in the 2020's
Where consumers and investors hoard cash rather than spending or investing it even when interest rates are low, stymieing efforts by economic policy makers to stimulate economic growth When lower rates of interest fail to increase the money supply
52
Types of SRAS policies
Free market policies : involve policies to increase competitiveness and competition. e.g. privatisation, deregulation, etc. Interventionist policies : involves government intervention to overcome market failure. e.g. higher government spending
53
Measure unemployment
Labour force survey and Claimant count
54
Quantitative easing
A form of monetary policy aimed at increasing the money supply in the economy
55

Econ A Level (10 decks)

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