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Economics > The Macroeconomy > Flashcards

The Macroeconomy Flashcards

1
Q

National income and
National income statistics

A

Country’s total output

Measure of the country’s total output

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2
Q

GDP

A

The total output produced in a country

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3
Q

GNI

A

GDP plus net income from abroad

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4
Q

Net property income from abroad

A

Profits, rent and interest earned on ownership of foreign assets minus payments of profits, rent and interest to non-residents

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5
Q

Compensation of employees

A

Income of workers who work in another country for a short period of time

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6
Q

Gross national disposable income

A

GNI plus net transfer of incomes to relatives and from other countries

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7
Q

MNC’s

A

Firms that operate in more than one country

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8
Q

Circular flow of income

A

A simplified view of how income flows around an economy

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9
Q

Methods of measuring GDP

A

-Output method- By calculating the total production of goods and services of a country.

-Income method- By calculating incomes earned by producing country’s output.

-Expenditure method- By calculating all spending on country’s output.

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10
Q

Market prices and
Basic prices

A

Prices paid by consumers.(With account of indirect taxes and subsides)

Prices charged by producers before the addition of indirect taxes and deduction of subsides

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11
Q

Gross investment

A

Total spending on capital goods

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12
Q

NDP

A

GDP - depreciation

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13
Q

NNI

A

GNI - depreciation

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14
Q

Net investment

A

Additions to capital stock

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15
Q

Depreciation (capital goods)

A

Value of capital goods that have been worn out or out of date

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16
Q

Open economy

A

Economy open to trade

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17
Q

Closed economy

A

Economy not open to trade

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18
Q

Circular flow of income in both open and closed economy

A

Refer to textbook

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19
Q

Injections

A

Additions to the circular flow if income, includes I+G+X (Investment + Govt. spending + Export)

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20
Q

Leakages

A

Withdrawals from the circular flow of income, includes S+T+M (Saving + Taxation + Import

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21
Q

Equilibrium and Disequilibrium graph

A

Refer to textbook

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22
Q

Aggregate demand

A

The total demand for an economy’s goods and services at a given price level in a given period of time.

AG= C + I + G + (X-M)

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23
Q

Dissaving

A

Consumer expenditure exceeding income by people or countries withdrawing past savings or by borrowing

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24
Q

Why do AG and price level have a direct relationship

A

-Wealth effect
-International effect
-Interest rate effect

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25
Q

Aggregate supply

A

The total output that producers in an economy are willing and able to supply at a given price level at a period of time

26
Q

SRAS

A

AS when there has not been enough time for the prices of factors of production to change

27
Q

LRAS

A

AS when prices of factors of production have been fully adjusted

28
Q

Reasons for SRAS positive effect

A

-Profit effect
-Cost effect
-Misinterpretation effect

29
Q

Shifts in SRAS

A

-Change in price of factors of production
-Change in taxes on firms
-A change in factor productivity or quality of resources
-Change in quantity of resources

30
Q

Supply-side shocks

A

Large and unexpected changes in SRAS

31
Q

Types of LRAS curves

A

-Keynesians LRAS curve- People who agree w the views of John Maynard Keynes and give intervention is needed to achieve full employment. (Refer to TB)

-New classical economist curves-Economists who think that economy will move toward full employment without govt intervention.(Refer to TB)

32
Q

Shifts in LRAS

A

-Net immigration
-Increase in retirement age
-More women entering the labour force
-Net investment
-Discovery of new resources
-Land reclamation

33
Q

Economic development

A

Increase in the welfare and quality of life

34
Q

Nominal and Real GDP

A

Nominal GDP is the total output measured in current prices

Real GDP is the total output measured in constant prices

35
Q

Price index

A

A way of comparing the changes in price overtime

36
Q

Causes and consequences of economic growth

A

-Increase in quantity of resources
-Increase in quality of resources

37
Q

Benefits and Costs of economic growth

A

Benefits
-Increase in availability of goods and services
-Increase in tax revenue
-Increase in transfer of payments
-More job opportunities
-Increase in business investment

Cost
-Resources moved from producing consumer to capital goods
-Workers may have to learn new skills
-Depletion of natural resources

38
Q

Unemployment

A

the state of being willing and able to work but not having a job

39
Q

Labour force participation rate

A

The proportion of the population that are working age and who are either working or actively seeking work

40
Q

Factors that contribute to the size of the labour force

A

-School leaving age
-Proportion of the women in workforce
-Retirement age
-no. of people who remain in full time education(above the school leaving age)

41
Q

Unemployment rate

A

no. of people employed
_____________________________X100
no. of people in the labour force

42
Q

Ways of measuring unemployment

A

Claimant count measure - a measure of unemployment based on those claiming unemployment benefits

Labour force survey measure - a measure of unemployment based on a survey that identifies people who are actively seeking a job

43
Q

Frictional unemployment and its types

A

Unemployment that is temporary and is when workers are switching between jobs.

-Voluntary - Unemployed people choosing not to accept jobs at wage rate
-Search - When people take time looking for jobs they are willing to accept
-Casual - When people have left a short term job and before they take up another one
-Seasonal - Unemployment arising during particular times where demand for a product falls

44
Q

Structural Unemployment and its types

A

Unemployment caused by the result of the changing structure of economic activity

-Regional - Arising from a decline in jobs from a particular area
-Technological - Caused by advances in technology
-International - When a country loses it international competitiveness in producing a product

45
Q

Cyclical Unemployment

A

Unemployment that results from lack of AD

46
Q

Underemployment

A

A situation where workers are working fewer hours than they like to or working jobs they are overqualified at

47
Q

Price stability

A

A low stable inflation rate

48
Q

Inflation

A

An increase in the economy’s price level over a period of time

49
Q

Types of inflation

A

Creeping- A low rate of inflation

Hyperinflation- A very high rate of inflation, which may result in people losing confidence in the currency

50
Q

Deflation

A

A fall in price level

51
Q

Disinflation

A

A fall in inflation rate

52
Q

Ways to calculate inflation

A

Annual average method- by calc inflation rate by comparing the average level of prices during one 12 month period to the previous 12 month period

Year on year method- by calc inflation rate by comparing the % change in price level for a given month and the same month of the previous year

53
Q

Consumer price index(CPI)

A

A measure that shows the average change in prices of a representative basket of products purchases by households

54
Q

How to calc CPI

A

1.Select base year
2.Find people’s spending patterns
3.Attach weights to different categories
4.Find out price change
5.Muliply weights by price changes

55
Q

Cost push inflation

A

Inflation caused by increase in cost of production

56
Q

Wage price spiral

A

Higher wages causing prices to rise, in turn, pushes wages up and so on

57
Q

Demand pull inflation

A

Inflation caused by increase in
AG not matched by a equivalent increase in AS

58
Q

Monetarists

A

Economists who consider that inflation is caused by a excessive growth in the money supply

59
Q

Benefits and limitations of Inflation

A

Benefits
-Stimulates output
=Reduces the burden of debt
-Prevents some unemployment

Limitations
-Reduction in net exports
-Menu costs
-Fiscal drag
-Discouragement of investment
-Shoe leather costs

60
Q

Factors that affect the consequence of inflation

A

-Cause of inflation
-Rate of inflation
-Accelerating or stable inflation
-Expected or Unanticipated
-Compared to others

Economics (4 decks)

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