The circular flow of income, aggregate demand/ aggregate supply

Question 1

Value added

Answer 1

-is the increase in the market value of goods or services as result of the production process

-Value added= value of production- Value of intermediate impacts

Question 2

Nominal

Answer 2

-monetary values for data e.g money GDP
-Not adjusted for inflation
-Data expressed at current prices

Question 3

Real

Answer 3

-adjusted for inflation
-prices held at level of the chosen base year
-data expressed at constant prices

Question 4

The circular flow of income

Answer 4

shows how money and good/services circulate within an economy between households, businesses + the government

Question 5

Households

Answer 5

-individuals+ families within the economy
-recieve income from FoP the provide for firms
-income is spent by households on goods and services in the product market

Question 6

Firms

Answer 6

produce goods and services to meet the demand of households
-hire labour, use capital and natural resources, and sell the products they make to households

Question 7

Government

Answer 7

collect taxes from households and businesses, provides public goods and services

Question 8

Injections

Answer 8

-investment
-exports
-gov spending

Question 9

Leakages

Answer 9

-savings
-imports
-tax

Question 10

Key factors affecting SR growth

Answer 10

-interest rates
-fiscal policy
-commodity prices
-exchange rates
-trading conditions
-condidence of businesses + household

Question 11

Key factors affecting LR Economic Growth

Answer 11

-investment
-productivity
-Labour supply
-research
-innovation
-enterprise

Question 12

Key Drives of Ecnomic Growth

Answer 12

-expanding the capital stock
-increasing the active labour supply
-extracting and selling natural resources

Question 13

Injection of demand for capital goods industries

Answer 13

-bigger capital stock can lift productivity/incomes
-economies of scale + better competitiveness
-investment helps to sustain export lead growth

Question 14

Economic growth benefits

Answer 14

-increased SOL
-Employment effects
-Fiscal dividends
-Accelerator effect
-increase productivity
-improved health
-new goods and services

Question 15

Sustain Economic growth in the long run

Answer 15

-building trust/social capital
-growing intra-regional trade
-improving institutions
-growing a dynamic private sector
-sound macro policies to control inflation
-focusing an addressing equity/fairness

Question 16

Factors that attract FDI

Answer 16

-Attractive rates of corporation tax
-soft loans+tax reliefs/othe subsidies
-trades+ investment agreement
-flexible labour markets
-special economic zones
-high quality infrastructure
-open capital markets to allow remitted profits
-availability of low cost labour

Question 17

Cost of growth

Answer 17

-Risk of higher inflation and higher interest rates
-Environmental effects
-Inequality of income and wealth