Macroeconomics Theme 2 <3

all other things stay the same

the total amount of planned spending on goods and services

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

changes to components of AD

spending by households on goods and services

The amount of money that households have available for spending and saving after taxes

the proportion of additional income that is spent on goods and services

the proportion of additional income that is saved not spent

change in consumption/change in income

1-MPC

the value of assets owned

flow of money

an asset that a borrower pledges to a lender as a security for a loan

the reward of saving and cost of borrowing

increase in house prices higher perceived wealth increase consumption

accumulation of capital stock

total amount that the economy spends on new capital

gross investment - capital depreciation

1 rate of economic growth 2 confidence levels 3 interest rates 4 government decisions 5 access to credit 6 regulation 7 animal spirits (not rational)

2 consecutive quarters of negative real GDP

G > T

G < T

decrease spending to lower the budget deficit

factors that automatically work toward stabilising the economy by reducing the short term fluctuation of the business cycle(income tax and unemloyment benefits)

increasing the growth of the economy through fiscal policy and government spending

the value of exports - the value of imports

the value of one currency against another

M > X

M < X

the proportional increase in imports from an increase income

strong pound imports cheap exports dear

weak pound imports dear exports cheap

atleast on factor of production is fixed

1 land 2 labour 3 capital 4 enterprise

1 changes in cost of raw materials 2 changes in the level of international trade 3 changes in exchange rate 4 changes in tax

all factors of production are variable

changes in productivity or quantity of factors of production

in the LR the economy will have full capacity

in the LR there is spare capacity

the total value of all goods and services produced annually in an economy

percentage increase in the total value of good and service adjusted for inflation

real GDP growth

% increase in real GDP

shift in LRAS

an increase in GDP that can be maintained without creating other problems

the difference between actual and potential GDP

1 fall in GDP growth 2 fall in confidence 3 fall in consumption 4 fall in global trade 5 increasing unemployment

1 more employment 2 more investments 3 more tax revenue 4 increase in living standards

1 inequality in wealth 2 inflation will go above 2% 3 negative externalities 4 leakages from the circular flow of income

1 high rates of economic growth 2 near full capacity or positive output gaps 3 low unemployment 4 high inflation 5 High confidence 6 budget surplus

1 negative economic growth 2 lots of spare capacity and negative output gaps 3 high unemployment 4 low inflation 5 low confidence 6 budget deficit

alternating periods of economic booms and economic recessions

where the economy is producing less than potential output

where the economy is producing more than potential output

maximum combinations of goods and services that can be produced if all resources are used efficiently

a model of the economy that shows the flow of goods, services and factors of production around the economy

investment exports government spending

spending imports taxes

an increase in spending, increases national income and consumption greater than the initial amount spent

1/(1-MPC)

MPW = MPS + MPT + MPM

1 - MPW

change in GDP = change in injections x multiplier

total output = total income = total expenditure

1 underground markets 2 income distribution 3 size of public sector 4 quality of data

GNI = GDP + net income from abroad

GDP measured in current prices not adjusted for inflation

(nominal GDP/price index) x 100

real GDP/population

the amount of money needed in one country to purchase the same goods and services in another country

benchmark year which other years are compared against

average value of goods and services as an index value

sustained increase in the general price level

a sustained decrease in the general price level

a fall in the inflation rates

weighted average of basket of good

weighted by percentage expenditure compared to income

change/original x 100

1 might not be relevant to everyone 2 not measured accurately 3 ignores substitution effect 4 ignores changes to quality of goods

a measure of inflation

increase in AD

decrease in SRAS

expected inflation wage bargaining increase in cost increase in inflation

borrowers - real value of debt decreases savers - value of your saving decreasing

1 higher cost of living 2 wage price spiral 3 decrease the value of savings 4 increase in unemployment 5 value of exports decreases 6 bad for people with fixed incomes

1 increase in value of savings 2 technology improvements and decrease in costs of production 3 increase in current account

1 value of our debt increases 2 downward wage price spiral 3 unemployment 4 investments are shifted abroad

increase in LRAS decrease in AD

claimant count ILO measure

The number of people claiming jobseekers allowance

a survey asked to people aged 16-65 if they have been out of work for the past 4 weeks and if they are ready to work within the next 2 weeks

unemployed/(unemployed + employed) x 100

1 frictional 2 structural 3 cyclical 4 seasonal

when people are between jobs

mismatch of skilled workers and skills demanded

when demand for labour is low in a recession

demand for labour is relatively low in certain times of the year

workers are overqualified for their jobs or work fewer hours than they would prefer

The ability to change occupations

The ability to move from one location to another for work