macro eco

Calculating GDP growth

New-old/old x100

Calculating GDP formula

C+I+G(X-M)

Circular flow of income model

ressource market-firms-product market-consumers

recession

point where the economy is decreasing

boom

highest point in the economy

recovery

economy slowly increases

trough

lowest point in the economy

advantages of GDP

shows size of economy

can show changes in economy

disadvantages of GDP

black market doesn’t appear

doesn’t show quality of life

distribution of wealth not shown

aggregate demand

total spending on goods

aggregate supply

total amount of goods

LRAS

long term aggregate supply

SRAS

short term aggregate supply

monetary policies

supply of money

interest rates

fiscal policy

government policies - spending and taxes

inflation

general increase in price

cost-push inflation

aggregate supply costs increase

prices increase - people have to pay more

demand-pull inflation

aggregate demand is higher than aggregate supply

prices increase