ADDITIONS TO CIRC. FLOW, INCREASE IN AD. E.G. EXPORTS (X), INVESTMENT (I) & GOVT. SPENDING (G)
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WITHDRAWALS/LEAKAGES
REDUCTIONS TO CIRC. FLOW, DECREASE IN AD. E.G. IMPORTS (M), SAVINGS AND TAXATION (T)
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MACROECONOMIC GOALS
1) ECON. GROWTH, 2) STABLE PRICES/LOW INFLATION, 3) LOW UNEMPLOYMENT. 4) CURRENT ACCOUNT OF BALANCE OF PAYMENTS, 5) EQUAL INCOME DISTRIB., 6) SUSTAINABLE ENVIRONMENT
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AGGREGATE DEMAND
TOTAL OF PLANNED EXPENDITURES IN AN ECONOMY AT A PRICE LEVEL OVER A PERIOD OF TIME E.G. (C)ONSUMPTION + (I)NVESTMENT + (G)OVT. SPENDING + [E(X)PORTS - I(M)PORTS]
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CONSUMPTION
TOTAL SPENDING OF UK HOUSEHOLDS ON GOODS AND SERVICES FOR PRIVATE USE. INJECTION INTO CIRC. FLOW
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SAVING
PROPORTION OF INCOME NOT SPENT ON CONSUMPTION, IMPORTS OR TAKEN IN TAX
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INVESTMENT
SPENDING ON CAP. GOODS (FACTORIES & MACHINERY) BY BUSINESS AND CREATES FUTURE PROD. CAPACITY. INJECTION INTO CIRC. FLOW.
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GOVERNMENT SPENDING
SPENDING BY GOVT. DEPARTMENTS & LOCAL COUNCILS ON GOODS + SERVICES. E.G. SCHOOLS & HOSPITALS. INJECTION INTO CIRC. FLOW.
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NET EXPORTS
THE DIFF. BETWEEN THE VALUE OF IMPORTS AND VALUE OF EXPORTS (NOT PRICE OR COST!!)
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AGGREGATE SUPPLY
TOTAL PLANNED PRODUCTION OF GOOD AND SERVICES IN AN ECONOMY AT A PRICE LEVEL OVER A PERIOD OF TIME. THE VERTICAL PART OF AS CURVE THE CAPACITY OF ECONOMY.
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MULTIPLIER EFFECT
KNOCK ON EFFECTS WHEN THERE IS AN (+) OR (-) IN AN ECONOMY. TELLS US THAT A SMALL CHANGE IN AD HAS A LARGE OR MULTIPLIED EFFECT ON AD AND GDP.
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MONETARY POLICY
USE OF INTEREST RATES TO MANIPULATE THE LEVEL OF AD IN AN ECONOMY.
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INTEREST RATES
COS OF BORROWING AND THE REWARD OF SAVING. TARGET 2% +/-1%
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EXPANSIONARY MP
(-) IN INTEREST RATES
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CONTRACTIONARY MP
(+) IN INTEREST RATES
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FISCAL POLICY
THE USE OF GOVT. SPENDING AND TAXATION TO MANIPULATE AD IN AN ECONOMY.
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SUPPLY SIDE POLICY
POLICIES DESIGNED TO SHIFT AS CURVEE TO RIGHT BY INCREASING THE PROD. OF FACTORS OF PROD. EG. LAND, LABOUR, CAPITAL, ENTERPRISE.
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INFLATION
SUSTAINED INCREASES IN AVERAGE PRICE LEVEL. UK GOVT. HAS MACRO.ECON. TARGETS OF STABLE PRICES, BANK OF ENG. TARGET FOR INF. IS 2.0% CPI
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DEMAND-PULL INFLATION
WHERE EXCESSIVE GROWTH IN AD RESULTS IN HIGH INCREASE IN PRICE LEVELS. CAN RESULT FROM AN INCREASE IN ANY FACTOR OF AD = [C+I+G+(X-M)] E.G. INCREASE IN CONSUMPTION
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COST-PUSH INFLATION
OCCURS WHEN AS CURVE SHIFTS LEFT DUE TO AN INCREASE IN THE COST OF PROD. E.G. RISE IN OIL PRICES
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Other cards in this set
Card 2
Front
WITHDRAWALS/LEAKAGES
Back
REDUCTIONS TO CIRC. FLOW, DECREASE IN AD. E.G. IMPORTS (M), SAVINGS AND TAXATION (T)
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