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23 Terms

1
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Define economic growth?

An increase in the value of a country’s production

2
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Define inflation

A sustained increased in the general level of prices

3
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Define unemployment

When workers are willing and able to work but cannot find a job

4
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Define “the balance of trade”

The difference between the value of exports and the value of imports

5
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What are the 7 macroeconomic objectives?

  1. A high rate of national income growth

  2. A low rate of inflation

  3. A low rate of unemployment

  4. A beneficial trade situation

  5. Protection of the environment

  6. An acceptable level of inequality

  7. A sustainable level of government

6
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What are the 4 ways to judge macroeconomic performance?

  1. Set macroeconomic objective - what a country wants

  2. Set macroeconomic targets - the number that would indicate #1 being achieved

  3. Look at macroeconomic statistics to see if #2 is being achieved

  4. If not, use macroeconomic policies to try and solve the problem

7
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What are the 3 targets for the UK’s performance?

  • GDP annual growth of 2%

  • Inflation 2% (but between 1% and 3% is fine)

  • Unemployment (approximately) 4%

8
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What is the current state of the UK’s performance?

  • GDP annual growth of3.2% - not good

  • Inflation 3.8% - not good

  • Unemployment 4.7% - okay

9
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What is one way of improving balance of trade?

establishing relations with emerging economies and countries with natural resource.

10
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What are some key things that impact the size of an economy?

  • Land - natural resources, geology (location - how much land is available to be used for production)

  • Capital (technology)

  • Labour force

  • Enterprise

  • Government policy

11
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What is income?

Payment for factors of production

12
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What are the main factors of production?

  • labour - wage

  • land - rent

  • capital

  • enterprise - dividends

13
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What are dividends?

Share of profits

Dividends are a percentage of a company's earnings paid to its shareholders as their share of the profits.

14
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What is the circular flow of income?

knowt flashcard image
15
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What are the 4 factors of production?

  • enterprise

  • capital (goods and services)

  • land

  • labour

16
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Give 3 examples of income?

  • wage (mostly through labour)

  • rent (land)

  • dividends (enterprise)

17
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What are the 2 agents in the circular flow of income?

  • firms

  • households

18
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What are the ways income flows in and out of the economy?

  • investment - loans from a bank for firms to buy capital

  • Savings

  • Imports

  • Exports

  • Gov spending

  • Taxes

19
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What are injections?

Money which comes into the circular flow of income

20
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What are withdrawals/ leakages?

money going up out of the circular flow of income

21
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Give some examples of injections

IGE

Investment (I)

Gov spending (G)

Exports (X)

22
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give some examples of withdrawals

STI

Savings (S)

Taxes (T)

Imports (M)

23
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What should the relationship be between injections and withdrawals

We way more injections than withdrawals as this will help the economy to grow