week 2 Flashcards

circular flow of income (31 cards)

1
Q

Withdrawals (w)/ Leakages

A

income of households of firms that are not passed on round the inner flow
e.g. money leaving circular flow

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2
Q

Injections (J)

A

expenditure on the production of domestic firms coming from outside the inner flow of income
e.g. money entering the circular economy

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3
Q

Withdrawal equation

A

W= S+T+M
withdrawals= net savings + net taxes+ import expenditure

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4
Q

injections equations

A

J=I+G+X
Injections = Investment + gov expenditures + expenditure on exports

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5
Q

aggregate demand equation

A

total expenditure on domestically produced goods and services
= domestic consumption +injections
= Cd + J(= I+G+X)

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6
Q

relationship between injections and withdrawals

A

equilibrium J=W
Growth J>W
negative growth J<W

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7
Q

Clockwise flow of income

A

business operational cycle of producing goods and paying wages to households

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8
Q

counter clockwise flow of income

A

the household supply of labour to business to receive income

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9
Q

claimant unemployment

A

those on unemployment benefits
statistics understate level of unemployment as many people ineligible to claim benefits

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10
Q

Standardised unemployment (ILO/OECD)

A

higher than claimant rate
Over the five-year period from 2015 to 2019: the average claimant count rate in the UK was 2.5% vs average standardised unemployment rate (16 +) was 4.4%.

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11
Q

composition of unemployment

A

by geographical region
by age
by gender
by ethnic group

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12
Q

inflows of unemployment (from jobs)

A

-redundant
-sacked
-temporarily laid off
-resigning

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13
Q

inflows of unemployment (outside labour force)

A

-school leavers
-people retuning to labour force (after raising children)

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14
Q

outflows of unemployment (to jobs)

A

-taking new jobs
-retuning to old jobs who temporarily laid off

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15
Q

outflows of unemployment (outside labour force)

A

-die
-imigrate
-retirement age
-temporarily withdraw (raise family)
-disheartened and give up

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16
Q

causes of unemployment

A

-real wage (classical) unemployment
-phases of business cycle and demand deficient (cyclical) unemployment
-frictional (search) unemployment
-seasonal unemployment
-structural unemployment

17
Q

real wage unemployment

A

disequilibrium unemployment caused by real wage being driven up about market clearing level
wages real = nominal wage/price index

18
Q

Keynesian unemployment

A

phases of business cycle and demand deficient (cyclical) unemployment. argue for use of fiscal and monetary policy to stabilise output, inflation and unemployment across business cycle

19
Q

structural unemployment

A

-changing patterns of demand
-regional unemployment
-technological unemployment (labour saving technical progress)

20
Q

inflation

A

annual percentage increase in price levels
-consumer price inflation (CPI)
-(RPI)

21
Q

GDP deflator

A

rate at which prices of all domestically produced goods and services are changing
-includes only domestically produced goods

22
Q

costs of inflation

A

redistribution
uncertainty
balance of payments
resources used to cope with inflation

23
Q

costs when inflation is anticipated

A

shoe leather costs- costs of having to hold less cash to avoid loss of value in money
menu costs

24
Q

cause of inflation

A

demand pull inflation
cost push inflation
interaction of demand pull and cost push inflation
expectations and inflation

25
demand pull inflation
demand for good exceed supply causing price to increase
26
cost push inflation
cost of production goes up causing prices to increase
27
relationship between unemployment and inflation
effects of increases in aggregate demand relative to potential output objectives vary across business cycle
28
phillips curve
apparent policy implications between wage inflation and unemployment
29
current account
trade in goods exports (credits) imports (debits) trade in services
30
balance on trade in goods and services
income flows (primary income balance) current transfers (secondary income balance
31
the financial account
-direct investment- significant and lasting interest in a business abroad -portfolio investment- transactions in debt and equity securities with no influence on the operations of a particular business -other investment and financial flows -flows to and from reserves