Macroeconomics Flashcards
(24 cards)
Give key macroeconomic variables (6)
National income
GDP
Employment rate
Inflation rate
Interest rate
Exchange rate
What was the unemployment rate in March 2025?
4.4%
What does interest rate increases mean?
Borrowing becomes more expensive
What is the circular flow of income?
Household members work in factories, the factories pay the household, the household consumes domestically produced goods from the factory, the money goes in a circle.
How does the circular flow of income become more complicated?
Imports/exports abroad
Injections of cash into businesses/factories
Banks and savings for households
What does fiscal policy relate to?
the government’s use of government expenditure and taxation
When may fiscal policy be used to expand the economy?
in times of recession
What may the government do to curb high inflation?
Raise interest rates to discourage spending
What is the idea of using interest rates or money supply to control inflation associated with?
The New Right
Who operates monetary policy?
The Central Bank
What does the Central Bank use to operate monetary policy?
Interest rates and money supply
Why does the Central Bank utilise monetary policy?
To control inflation and orient economic activity
Who decides fiscal policy?
The government
What does the government use to operate fiscal policy?
Spending and taxes
What is GDP?
The measure of the size and health of a country’s economy
How does the Office for National Statistics calculate GDP?
The value of goods and services + national income + national spending
Which side are monetary and fiscal policies and what do they do?
Demand side - affect the position of the AD curve
What are supply side policies often associated with?
free market approaches to economics and reduction of government intervention
Give examples of supply side policies (5)
Reducing government spending to increase availability of resources for the private sector
Cut taxes to increase incentives
Reduce the power of trade unions
Reduce state benefits
Deregulation and privitisation
Neoliberal shit
What does macro policy seek to secure?
Stable growth and to avoid inflation and unemployment
What is monetary policy?
The supply of money in an economy
What is fiscal policy?
Taxes and government spending (what Rachel Reeves does)
What is a supply side policy?
Measures governments take to increase the availability or affordability of goods and services
What are demand side policies?
Increases the demand for goods and services in the economy
Measures governments take to increase aggregate demand to decrease unemployment and increase output
