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mr steeds theme 2 Flashcards

(65 cards)

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1
Q

balanced economy

A

withdraw=injection

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2
Q

economy shrinkage

A

withdraw greater than injection

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3
Q

economy growing

A

withdraw smaller injection

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4
Q

agregate demand

A

total planned expenditure on a country’s good services produced within an economy in each time period

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5
Q

ad formula

A

AD=C+I+G+(x-m)
65%+15%+25%-5%

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6
Q

consumption

A

what we buy everyday

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7
Q

factors effecting what we buy

A

disposable income
gross pay
tax/insurance
bills

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8
Q

wealth affect

A

as assets increase In value spending increase

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9
Q

availability or credit

A

more you borrow more you spend

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10
Q

rate of interest

A

higher interest more you pay back the less you spend.
higher interest more saving less spending

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11
Q

expectations

A

what we expect will influence consumption

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12
Q

composition of household unemployment

A

more unemployment less consumption

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13
Q

determinant of saving

A

more saving less spending

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14
Q

factors of consumer spending

A

disposable income
employment
sonsumer credit
cost of mortgage

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15
Q

real

A

allowing g for inflation

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16
Q

investments

A

total spendinf on capital goods by firms

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17
Q

gross investment

A

total amount the economy spends on new capital

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18
Q

factors influencing planned business investments

A

intrest rates/credit
retained profit

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19
Q

accelerator affect

A

rise in demand for consumer goods and services will cause higher percentage change in capital goods

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20
Q

output gap

A

difference between the output level of GDP and its estimate potential level

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21
Q

negative output

A

where an economy -ys actual output or real gross domestic product is below potential output

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22
Q

trade balance

A

difference between value of exports and imports

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23
Q

factors influencing exports

A

relative price of exports in world markets
exchange rate
non profit demand factors

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24
Q

exchange rate

A

rate of which one country can be changed for another

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25
floating exchange rate
strength of currency supply and demand drives the external value of a currency in a market
26
advantages of floating
monetary policy autonomy shock absorption currency reserves
27
drawbacks of floating
exchange rate volatility currency risk inflation passes through
28
fixed exchange rate
central bank fixes the currency value
29
advantages of fixed
price sustainability reduced exchange risk foreign investment
30
drawbacks of fixed
lack of flexibility balance of payment issues dependence on reserves
31
managed floating
central bank may intervene in a floating exchange rate to influence the value by buying/selling currency use of interest rates
32
multiplier formula
1 / marginal propensity to save
33
when does high multiplier occur
economy has plenty capacity to meet higher AD marginal propensity to import and tax is low
34
when does low multiplier occur
economy is close to capacity limits during boom phase propensity to import goods/services are high
35
short run as
total output of goods/services that firms in economies are willing and able to supply at a given price level
36
long run as
represents maximum output when all factors of production are fully and efficiently employed
37
what increases as
demand pull inflation
38
what decreses as
cost push inflation
39
factors causing as to shift
higher min wage labour productivity business indirect taxes cost of imported materials supply shocks
40
supply side shock
affects short run as and can affect country's long run productive potential
41
contraction fisical policy objectives
government spending decreases taxes increase decreasing demand inflation
42
what does contractional fiscal policy do
decrease deficit increases unemployment increase inequality decreases economic growth increase balance of payments increase sustainability
43
expansionary fiscal policy objective
government spending increases taxes decrease main:economic growth
44
what does expansionary fiscal policy do
increase deficit increase inflation decrease sustainability decrease unemployment decrease balance of payments
45
what controls the money supply
intrest rates qe credit availability exchange rates
46
loose monetary policy objectives
decrease inters rates increase credit availability decrease inflation , inequality, unemployment,deficit,sustainabiliy, interest rates,BOP increase growth, imports
47
tight monetary policy objectives
increase interest rates decrease credit availability increase inflation, inequality,unemployment,deficit, sustainability, interest rates,BOP decrease growth, imports
48
QE steps
bank creates new money electronically Used to buy bonds back (prices increase-lower yield%) effect of qe causes interest rates to fall stimulates increase in ad through rise in consumption and investment.
49
eval of qe
low interest rates can distort allocation of capital and keep alive zombie companies. surge in share prices+property values latter worse housing increase in rent impended geographical immobility of labour
50
QE leads to lower interest rates
banks sell bonds o BOE have more money to lend. interest rates fall-cheaper for gov to borrow-increases gov spending. falling interest rates cause out flow of hot money depreciating exchange rate may lead to increase in exports(cheap)
51
liquidity trap
even if interest rates lower this may have no effect if people will borrow or not
52
inflation
prices increase
53
disinflation
prices still increase but at a slow rate
54
deflation
prices decrease
55
problems of deflation
consumers waiting for lower prices debts increase real cost of borrowing prices increase lower profit margins confidence+savings income distribution deflation makes exports more competitive
56
QT
tight policy BOE sells bonds back to banks increase interest rates
57
eval of QT
been modest use with caution
58
what do supply side policies do
try to increase long run productive capacity snd efficiency of an economy
59
60
main aims of supply side policies
incentives productivity mobility of labour capital investments
61
supply side policies to improve incentives
tax cuts deregulation trade/liberalisation intelectual property protection
62
Free market policies
Privatisation Deregulation Tax cuts Reducing trade union power Immigration reforms
63
Intervention policies definition
Policies that require gov intervention
64
Intervention policy
Infesting in education,healthcare,infrastructure,training Higher taxes on wealthy public goods Higher minimum wage Management of exchange rate
65
Widec and spiced
Weak pound imports dear exports cheap Strong pond imports cheap exports dear

economics (5 decks)

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