macroeconomics

Economic growth

Rate of change in output it is an increase in long term productive potential of the country

Gross domestic product

Measurement of output , total value of g/s produced in a country in 1 yr

Total gdp

Overall GDP of the country

GDP per capita

Total gdp / n.o people

Nominal GDP

Value of gdp without being adjusted for inflation

Real gdp

Value of gdp adjusted to inflation

Factors which can increase gdp (name 3)

Population growth

investment in infrastructure

Capital investment

Technological investment

Draw the circular flow of income

What is the purpose of the price mechanism

It is to allocate resources efficiently therefore giving firms incentive to be more innovative, make more products

State injections into the circular flow of income

Government spending

Investments

Exports

State the withdrawals in the circular flow of income

Imports

Taxation

Savings

Provide the 4 factors of labour

Land

Labour

Capital

Enterprise

What is the purpose of firms

To use the 4 factors of production from households to create g/s

What do household get in return for labour and land from firms

Land they can gain rent

Labour they can gain wage

What do households do after gaining factor income

They spend on g/s

Define economic growth

It’s an increase in a country’s real GDP or rate of change in output

State the factors which can increase economic growth

More capital provided

Improved technology

More/new resources

Larger labour force

Increase in quality or quantity of g/s

State the limitations of using GDP as a measurement to compare living standards

Hidden economy is not accounted for + people selling and earning money from it avoid paying taxes on it

Distribution of income may be unequal majority of wealth could be from rich people whilst the poor have a lot less

Scarce resources if they contribute to the economy it’s not sustainable for long term

Living environment like pollution and congestion can reduce quality of life despite rise in GDP

State the difference between GDP and GNP

GDP the total value of g/s produced within a country’s borders

But GNP is the total value of g/s produced by a country’s residents + overseas

Draw a short run economic growth graph

Draw a long term economic growth graph

Draw the economic cycle

National income

Total income earned by the factors of production in an economy over time