Flashcards in Macroeconomics Deck (29):
Average propensity to consume (APC)
The proportion of income that households devote to consumer expenditure
Average propensity to save (APS)
The proportion of income that households devote to saving
Marginal propensity to consumer (MPC)
The proportion of additional income that households devote to consumer expenditure
How do you work out APC?
How do you work out MPC?
Change in household consumption
Change in disposable income
Marginal propensity to withdraw (MPW)
The proportion of additional income that is withdrawn from the circular flow - the sum of the marginal propensities to save, export and tax
The multiplier (K)
The ratio of a change in equilibrium real income to the autonomous change that brought it about
How do you calculate the multipler
MPW= MPS+ MPI+MPT
How to calculate real GDP?
Nominal GDP Figure x base index
Current year price index
How to calculate economic growth?
Change in real GDP
Original year real GDP x 100
GDP per capita
GDP taking population size of a country into account
How to calculate GDP per capita?
GDP of country
Population of a country
The total amount that producers in an economy are willing and able to produce at a given price level in a given time period
The total demand for goods and services produced in an economy at a given price level and in a time period
What are the 7 factors that affect the consumer expenditure?
• real disposable income
• consumer confidence
• the rate of interest
• age structure of the population
• distribution of income
What is the name of Keynes model that portrays the relationship between consumer expenditure and household income?
The consumption function
What are the 8 factors affecting investment?
• rate of interest
• current profit level
• capacity utilisation
• corporation tax
• changes in disposable income
• advances in technology
• price of capital equipment
What are the 4 factors affecting government spending?
• level of economic activity
• political reasons
• political reasons
• other factors - war, terrorism
A measure of the economic activity carried out in in an economy during a period of time
Process by which real GDP increases over time
How do we increase GDP in the short run?
We spend more
How do we increase GDP in the long run?
Maximise the output the economy can produce ( PPF)
Economic growth that continue over time and does not endanger further generations ability to expand productive capacity
How do we measure economic growth?
Measures the value of GDP at that years price level
A situation in which injections of cash into the private banking system by a central bank can fail to decrease IR making monetary policy ineffective
Inflation rate targeting
Central banks are responsible for using monetary policy to keep inflation close to the agreed level
Symmetric inflation targeting
A requirement placed on a central bank to respond when inflation is too low as well as too high where 1% above target is just as bad a 1% above target