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Macroeconomics > Macroeconomic models > Flashcards

Macroeconomic models Flashcards

1
Q

What is wealth?

A

The sum or stock, of all your assets added up

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2
Q

What is income?

A

measure of the flow of money a person or economy receives each year

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3
Q

What are the factors of production?

A

The things that are needed to produce something. They spell out CELL; Capital, Enterprise, Land and Labour

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4
Q

What can be deduced from the circular flow of income model?

A

Income=expenditure=output

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5
Q

What is national income?

A

The income earns by everyone altogether in a country

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6
Q

What is national income?

A

The income earns by everyone altogether in a country

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7
Q

Why does national income=national expenditure=national output?

A

The total spending from households across the economy must come from the total income they earn. Households spend on the total output on goods and services produced by firms in the economy

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8
Q

What is real GDP?

A

Real gross domestic product .A statistic that measures the value of an economy national output, adjusted for inflation.

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9
Q

What are the three types of leakages/withdrawals?

A

Savings, imports, taxes

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10
Q

What are taxes?

A

Money paid to the government by consumers, firms and workers

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11
Q

What are savings?

A

Disposable income that is not spent by households.

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12
Q

What are imports?

A

Spending on foreign goods and services.

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13
Q

What is a leakage/withdrawal?

A

When money leaks out of the circular flow

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14
Q

What is factor income?

A

Money paid by firms to households in return for factors of production

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15
Q

What are the three types of injections to the circular flow of income?

A

Government spending, Investment and exports

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16
Q

What is investment?

A

Banks use our savings to invest back into our firms, injecting money into the circular flow

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17
Q

What is government spending?

A

When the government injects money into the economy by spending on schools, teachers, hospitals, doctors etc.

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18
Q

How does the circular flow of income work?

A

Firms buy factors of production, like labour and land, from households. In return, they pay households factor incomes, like wages and rent. Households then spend their factor incomes on firms in exchange for the goods and services.

19
Q

Disposable income

A

income minus taxes

20
Q

Multiplier effect

A

When an initial increase in an injection leads to a much bigger, overall effect on the economy

21
Q

Multiplier ratio

A

Total change in real GDP/Initial injection or 1/1-MPC

22
Q

Accelerator effect

A

When real GDP increases, which signals to firms that consumers are demanding more goods, so firms increase their investment, to produce more goods

23
Q

Benefits

A

The money given by the government to people who need financial help.

24
Q

interest rate when saving

A

The return on your savings

25
Q

Interest rate when borrowing

A

The percentage of your borrowing which you pay to the bank

26
Q

short run

A

when at least one factor of production is fixed

27
Q

aggregate supply

A

Total amount produced in an economy

28
Q

Contraction in AS

A

A decrease in the price level leads to a decrease in real GDP

29
Q

long run

A

all factors of production are variable

30
Q

spare capacity

A

When the economy is producing below its maximum potential output (horizontal part of Keynesian LRAS)

31
Q

Bottle neck

A

When the economy is nearly producing at its maximum potential output (bendy part of Keynesian LRAS

32
Q

Full employment

A

When the economy is producing at its maximum potential output (vertical part of Keynesian LRAS)

33
Q

why would
SRAS shift

A

The SRAS will shift if there is a change in the cost of production in an economy

34
Q

Interest rate (saving)

A

The percentage of your savings paid to you by the bank

35
Q

Interest rate (borrowing)

A

The percentage of the amount you borrow that you need to pay to the bank

36
Q

Downward multiplier effect

A

Where an initial increase in withdrawals leads to a larger decrease in aggregate demand

37
Q

Positive wealth effect

A

When an increase in wealth makes consumers feel more confident and therefore increase their consumption, increasing aggregate demand.

38
Q

Factors of production

A

Capital, enterprise, land, labour

39
Q

High animal spirits

A

Investor confidence is high

40
Q

Wealth effect

A

When changes in consumers wealth affect their confidence and spending

41
Q

Savings ratio

A

What percentage of disposable income consumers will save

42
Q

Savings ratio formula

A

Total savings/post tax income

43
Q

Marginal propensity to consume

A

A measure of the increase in consumer spending due to an increase in income

Macroeconomics (4 decks)

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