Macroeconomic objectives and theory

Question 1

Define

Aggregate

Answer 1

Total amount at a given time

Question 2

Aggregate Supply

Answer 2

Level of output produces in the economy at a certain price point

at a certain point in time

Question 3

Aggregate Demand

Answer 3

Total dollar value of spending on finished goods and services

C + G + I + (X-M)

Within an economy during a certain time period

Question 4

Pros of economic growth

IMPORTANT

Answer 4

Real income, material welfare increases
Economic opportunities - more contributions to economy (multiplier effect)
Tav revenue up, more GST from sold g+s
More advancements in society thru government investment, competing firms.

Question 5

Cons of economic growth

Answer 5

Doesn’t account for non-market activities
Hidden inequality within the ‘average’ representation of economy performance
Comes at cost of environment.
Doesn’t indicate sustainable growth.
Doesn’t compare size to GDP.

Question 6

Real income

Answer 6

The value of your income adjusted for inflation
Basically demonstrates the actual purchasing power of your money.

Question 7

Keynesian aggregate supply curve

Answer 7

Elasticity of AS is dependent on level of spare productive capacity in different stages of the economic cycle.

Question 8

The multiplier effect

Answer 8

How much impact is an input going to have on output? (investment, government spending .. )
if 10 billion spent and 25 billion made overall, 1.5x multiplier effect.

gov spends, people spend, profits increase economy stimulated.

Higher likelihood of spending = higher multiplier

Question 9

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