macroeconomic objective

economic growth

the level of production of goods and service - measured in GDP

current account

record of the monetary value of imports and exports of goods and services

inflation

a persistent or continuing rise in the average price level

unemployment

number of people who don’t have jobs

3 economic agents

households, firms, government

households

provide factors of production e.g. labour

firms

provide goods and service

government

regulated market and provides public services to solve market failure

consumption / spending

where individuals attain goods and services to satisfy wants

savings

money placed in an official scheme such as a bank or savings account

interest rate

the cost of borrowing and the reward for lending money when saving

disposable income

the amount of money you have remaining after deductions and direct tax

consumer confidence

the certainty about the economy

determinants of investment

interest rate, rate of economic growth, business confidence, government regulations

effect of interest rates on investment

⬆interest rate - ⬆ cost of borrowing ∴ lower investment

effects of rate of economic growth on rates of investment

⬆ income - ⬆ potential sales + profits ∴ higher investment

effect of business confidence on investment

⬆ certainty about the economy due to stability of prices - ⬆ business spending ∴ higher investment

effect of govt regulations on investment

⬆ regulations - less flexibility in business investment ∴ lower investment

collateral

an asset that a bank can own if the borrower fails to payback the loan

causes of changes in interest rate

increases due to higher risk, long-term loan periods and bad credit scores and vice versa

base rate

the central banks’ primary monetary policy that acts as the benchmark interest rate for commercial banks and the economy

progressive tax

a higher proportion of tax from income as income level rises

regressive tax

a lower proportion of tax from income as income level rises

4 main macro objectives

control of prices, economic growth, lowering unemployment, balance of payment

gross domestic product (GDP)

measures the total monetary value of all goods and services produced in a country in a time period

target unemployment rate

2%

UK target inflation rate

2%

deflation

a continuing tendency for the average price level to fall

disinflation

rate of inflation is falling but still postive

balance of payment

a record of all the currency flows into and out of a country within a certain time period

trade deficit

import more than you export

trade surplus

export more than you import

borrowing

when consumers spend more money than they earn, causing them to borrow money from banks and other organisations that loan money

investment

spending on capital goods such as new factories, buildings, machinery + vehicles done by firms

direct tax

any tax deducted directly from a worker’s wage

indirect tax

any tax charged to the supplier of a product that is inevitably paid for by the consumer (VAT)

recession

-ve GDP growth for 2 or more consecutive quarters