Theme 2 (MR STEEDS) Flashcards
(58 cards)
1
Q
What are some macroeconomic objectives?
A
- economic growth
- balance of payments
- unemployment
- inflation
- inequality
- deficit
2
Q
What is the formula for marginal propensity to save?
A
The change in savings/change in income
3
Q
What is the formula for marginal propensity to consume?
A
The change in consumption/change in income
4
Q
What are the determinants of savings?
A
- wealth effect
- rate of interest
- expections
- unemployment
5
Q
What are the determinants of consumption?
A
- expections
- income
- debt
- savings
6
Q
What is the formula for aggregate demand?
A
Consumer spending + government spending + investment + (imports - exports)
7
Q
What are some factors influencing planned business investments?
A
- interest rates
- business taxes
- expected and actual of goods and services
- confidence
8
Q
What are some factors considered by the Bank of England when setting INTEREST RATES?
A
- GDP growth
- confidence
- wages
- unemployment
9
Q
What are some things that the government spends on?
A
- transfer payments
- recurring payments
- investments projects
10
Q
What are some factors influencing exports?
A
- exchange rate
- non-demand factors
- strength of aggregate demand
11
Q
What are some factors influencing imports?
A
- global demand
- exchange rate
12
Q
What are some advantages of the free floating exchange rate?
A
- shock absorption
- trade balance adjustments
13
Q
What are some disadvantages of the free floating exchange rate?
A
- exchange rate volatility
- currency risk
14
Q
What are some advantages of the fixed exchange rate?
A
- price stability
- reduced exchange rate risks
15
Q
What are some disadvantages of the fixed exchange rate?
A
- lack of flexibility
- balance of payments issues
16
Q
What is the formula for the multiplier effect?
A
1/MPW or 1/1-MPC
17
Q
What does marginal rate of withdrawals have in it?
A
- marginal propensity of saving
- marginal propensity of taxation
- marginal propensity of imports
18
Q
What causes a higher multiplier value?
A
- MPW is low
- lower interest rates
19
Q
What causes a lower multiplier value?
A
- MPW is high
- higher interest rates
20
Q
What causes an increase in aggregate demand?
A
- increased consumer spending
- increased government spending
- increased investments
- increased exports
21
Q
What causes a decrease in aggregate demand?
A
- decreased consumer spending
- decreased government spending
- decreased investments
- decreased exports
22
Q
What are some factors that shift the SRAS curve?
A
- business indirect taxes
- cost of imported materials
- supply shocks
23
Q
What are some factors that shift the LRAS curve?
A
- quantity or quality of resources
- productivity
- technology
24
Q
What happens in contractionary/tight fiscal policy?
A
- deficit decreases
- economic growth decreases
- balance of payments decreases
- gap of inequality decreases
- unemployment increases
- sustainability increases
25
What happens in expansionary/lose fiscal policy?
- deficit increases
- economic growth increases
- balance of payments increases
- gap of inequality increases
- unemployment decreases
- sustainability decreases
26
What are parts in the monetary policy?
- rate of interest
- credit availability
- exchange rates
- QE
27
What will happen when lose monetary policy happens?
- imports become more expensive (increases balance of payments)
- supply increases (depreciation of the pound)
- gap of inequality increases
- unemployment decreases
- sustainability decreases
- deficit decreases
- interest rates decreases
28
What happens when tight monetary policy happens?
- exports become more expensive and more competitive (decreases balance of payments)
- decrease in credit availability
- gap of inequality decreases
- unemployment increases
- sustainability increases
- deficit increases
- interest rates increases
29
What are characteristics of a recession?
- decreased spending and consumption
- higher unemployment
- lower inflation (demand pull)
- increased government spending
30
How does QE work as an instrument of monetary policy?
- banks creates new money electronically
- this money is then used to buy bonds
- more demand leads to higher prices
- rise in prices leads to lower yield on bonds
31
What are some advantages of QE?
- lowered the threat of deflation
- lower long term interest rates leads to business confidence being higher
32
What are some disadvantages of QE?
- inflationary pressure
- lower interest rates has reduced the annual incomes from pension funds
33
What is some evaluation for QE?
- uncertain time lags
- impact of QE on the real economy
- lower interest rates-> cheap money
34
How does QE affect the macroeconomy?
wealth effect -> lower yields leads to higher shares and bond prices
lending effect -> increases lending from banks and spending in the economy
currency effect -> lower interest rates causes the exchange rate of weaken
35
What does QE do to the market?
- increase government spending
- lower yields -> currency depreciation
36
What are some advantages of economic growth?
- increased employment
- increased innovation
37
What are some disadvantages of economic growth?
- inequality
- inflation
38
What might cause economic growth?
- increased productivity
- increased in capital goods
- increased investments
39
What might cause economic growth to be reduced?
- higher inflation
- higher unemployment
- lower productivity
40
Why might a recession happen?
- changes in government policies
- financial crises
41
What may cause underemployment?
- mismatch of skills and experience
- insufficient hours/pay
42
What are some causes of inflationary pressure?
- lower interest rates
- increased business confidence
43
What causes an increase in consumer confidence?
- lower unemployment
- lower inflation
- lower interest rates
44
What causes a decrease in consumer confidence?
- higher unemployment
- higher inflation
- higher interest rates
45
What causes an increase in business confidence?
- GDP growth
- increased consumer spending
- lower inflation
46
What causes a decrease in business confidence?
- lower consumer spending
- higher inflation
- tax burden
47
What are some benefits of balanced government budget?
- lower interest rates
- reduced national income
48
What are some drawbacks of balanced government budget?
- reduced government spending
- reduced economic growth
49
What factors can cause a positive multiplier effect?
- reduced withdrawals
- increased investments
50
What factors can cause a negative multiplier effect?
- reduced injections
- higher taxation
51
What are some types of injections?
- government spending
- investments
- exports
52
What are some types of leakages?
- savings
- taxation
- imports
53
What causes short term economic growth? (AD CURVE SHIFTS)
Increased aggregate demand
- lower interest rates
- lower taxes
- increased investments
54
What causes long term economic growth? (AS CURVE SHIFTS)
Increased quantity/quality of factors of production
- increased in productivity
- increased investments
- improved infrastructure
55
What factors impact consumption?
- disposable income
- interest rates
- consumer confidence
- level of employment
56
What factors impact investments?
- interest rates
- business confidence
- tax
- level of competition
57
What factors impact government spending?
- economic growth
- inflation
- debt level
58
What factors impact exports?
- global demand
- exchange rates
- level of competition
