Key terms 

[[GDP and circular flow of income[[

• ^^GDP^^- the total output of goods and services produced over a period of time in an economy

Disadvantages of using GDP to measure living standards:

- Does not measure the quality of life such as spending on health and education

• ^^Real GDP^^- total value of goods and services produced in an economy taking into account inflation
• ^^Circular flow of income-^^ money flowing around the economy between consumers, households and firms including injections such as government spending and exports and with withdraws such as taxation, savings and imports
• To remember withdraws it’s ^^STM^^ - money leaving the economy
• To remember injections it’s ^^GIX^^- money entering the economy
• ^^The multiplier effect-^^ when an initial injection into the circular flow of income causes a bigger, final increase in national income
• ^^Negative multiplier^^ - when the government reduces expenditure
• ^^National income^^- net income produced from abroad
• ^^economic growth^^ - the increased production of goods and services each year so that individuals have a higher standard of living
• ^^MPC- marginal propensity to consume^^ - this is the amount of how much more an individual will spend for every additional dollar of their income. The higher the MPC, the greater the multiplier

^^MPS - marginal propensity to save^^ - this is the amount of how much more an individual will save for every additional dollar of their income

[[Macro Objectives[[

• @@inflation@@ - a general rise in price

• @@Measure of inflation@@

  • consumer price index ( CPI)
  • Retail price index
  • \

  Mind Map for CPI

  Definition of CPI

  • CPI is a statistical measure of inflation
  • It measures the average price change of a basket of goods and services
  • The basket includes food, housing, clothing, transportation, medical care, and recreation

  Calculation of CPI

  • CPI is calculated by taking the price of the basket of goods and services in a base year and comparing it to the price of the same basket in the current year
  • The percentage change in price is the inflation rate

  Importance of CPI

  • CPI is used to adjust wages, salaries, and pensions for inflation
  • It is used by the government to make economic policy decisions
  • It is used by businesses to adjust prices and make investment decisions

  Limitations of CPI

  • CPI does not include housing costs as monthly rents/mortgage repayments take a large proportion of consumer spending
  • the basket of goods is only updated once a year - tastes and preferences change often and so the basket may not reflect these new changes.
  • It only measures the cost of living for average households and there are different sizes of households

• @@economic growth@@ - the increased production of goods and services each year so that individuals have a higher standard of living

• @@Sustainability@@ - growing the economy using natural resources but without diminishing those resources from the future

• @@Unemployment@@ - those actively seeking work but not employed

• @@Deficit@@ - how much money the government borrows over a period of time

• @@Debt@@ - add up all the deficit you get the debt

• @@Balance of payments@@ - measures all international economic transactions between the uk and its trading partners. It is simply measures against imports and exports

• @@inequality@@ -

• @@Philips curve@@ - suggests there is an inverse relationship between inflation and unemployment. - when employment is high wages rise faster, people have more money to spend so prices go up due to the high demand which increases inflation vice versa

<<How to judge economic growth:<<

• <<I have Interest In The GDP of Employment Exchange rate Debt<<
• Inflation
• Interest Rate
• Trade deficit
• GDP
• Employment rate
• Exchange Rate
• Debt

[[components of demand- consumption and investment[[

• $Consumption$ - consumer spending / expenditure on goods and services
• $Influences of consumption$
  • $disposable income$ - money left from paying NI and tax
  • $Wealth-$ value of peoples assets
  • $Inflation$ - general rise in price
  • $Interest rate$ - the return on savings or the rate of borrowing

<<10 factors of consumption: Catherine’s MPC or MPS Was Repeatedly Inserted Into Consential Cat Lipsing.<<

- Confidence

-MPC or MPC

-Wealth Effect

-Rate of Employment

-Interest Rate

-Inflation

-Credit Availability

-Consumption of households/population

-Level of Savings

• $disposable income$ - income left after tax and NI have been deducted
• $investment$ - An injection into the circular flow of income
• $Influences on investment$
  • cost of machinery
  • New developments in technology
  • Consumer confidence
  • Government policy
  • Risks
• $accelerator theory$ - as output increases investment will increase at an accelerating rate. Or as output increases firms will start to increase investment
• $discretionary income$ - income after all monthly bills including NI and Tax.

$Capital Investment$ - investment on machinery, equipment, and infrastructure

[[components of demand- government spending and international trade[[

• %%Exports%% - sending out goods to another country such as oil and petroleum. Exports are an injection into the circular flow of income. They influence exchange. They make up -5% of AD (x-m)
• %%Imports%% - bringing in goods from another country such as cars, goods, clothing, and manufacturing equipment. Money flows out of the circular flow of income. This is a withdrawal of CFI. Imports are highly inelastic as they are necessary
• %%International trade%% -
• %%privatisation%% -

[[fiscal policy[[

• ^^fiscal policy^^ - changes to government spending and taxation in order to influence aggregate demand (AD)
• ^^expansion fiscal policy (loose)^^ - this is when the government increases government spending and reduces tax in order to increase AD
• ^^contractionary fiscal policy (tight)^^ - this is when government reduces government spending and increases tax in order to decrease AD
• ^^crowding out^^ -
• ^^output gap^^ -

[[Aggregate Demand and supply curve[[

• @@Aggregate Demand@@ -
• @@Aggregate Supply@@ -
• @@equilibrium@@ -
• @@exchange rate policy@@ -
• @@interest rate@@ - the cost of borrowing or the return on savings

[[monetary policy[[

• %%monetary policy%% -
• %%quantity easing%% -
• %%yield on bonds%% -
• %%credit availability%% -
• %%liquidity trap%% -
• %%hot money%% -

[[supply side policy[[

• ^^supply side policy^^ -
• ^^Geographic immobility^^ -
• ^^Occupational immobility^^ -
• ^^Cooperation tax^^ - tax on business profit

[[Random[[

• ==animal spirit== -
• ==MPC - marginal propensity to consume== - an amount of how much more an individual will spend for every additional dollar of their income, the higher the MPC the greater the multiplier
• ==MPS - marginal propensity to save== - this is the amount of how much more an individual will save for every additional dollar of their income
• ==Negative equity== -
• ==Crowding in== -
• ==Crowding out== -
• ==Automatic stabilisers== -

[[Others[[

• $Claimant count$ - number of people claiming unemployment benefits/ Jobseeker’s Allowance