economic

• what is the circular flow of income 


  The movement of spending and income throughout the
• What is the factor service

  The services provided by the factors of production
• what is the factors of income

  The returns earned by the factors of production (Profit, Interest, Rent, Wages)

  The returns earned by the factors of production (Profit
• WHAT is the circular flow of income

  • The movement of spending and income throughout the economy or
  • Flow of products and income between producers/ firms and households/consumers.
• Three leakages

  1. Imports2.Savings

  3. Taxes
• Three inject

  Injections:

  economy.

  1. Investments
  2. Exports
  3. Government Expenditure
• what are leakages

  Leakages - Withdrawals of possible spending from the circular flow of income
• Injections - Additions of extra spending into the circular flow of income
• aggregate


  this is the total amount that producers in an economy are willing to produce and willing to supply at a given price level in a given time period
• Productivity - Output, or production, of a good or service per worker per unit of a factor of production in a given time period
• Privatisation - Transfer of assets from the public to the private sector
• explain a aggregate supply curve

  
• Aggregate Demand - The total demand for a country's goods and services at a given price level and in a given time period
• Macroeconomic Equilibrium - A situation where aggregate demand equals aggregate supply and real GDP is not changing
• why is the ad curve downwards sloping

  The Wealth Effect:

  • A fall in the price level increases the amount of goods and services that wealth kept in the form of money in bank accounts and other financial assets, can buy.
• why does the ad curve slope downwards

  The Interest Rate Effect:

  • A rise in the price level means that some people will sell financial assets such a government bonds, to obtain more money to pay the higher prices. The resulting increase in the supply of government bonds reduces their price and a fall in the price of bonds raises Interest Rates due to their inverse relationship.

  The inverse relationship is because the amount paid in interest on a bond stays the same when its price alters. The higher interest rate is then likely to reduce
• why does the ad curve slop downwards

  The Interest Rate Effect:

  • A rise in the price level means that some people will sell financial assets such a government bonds, to obtain more money to pay the higher prices. The resulting increase in the supply of government bonds reduces their price and a fall in the price of bonds raises Interest Rates due to their inverse relationship.

  The inverse relationship is because the amount paid in interest on a bond stays the same when its price alters. The higher interest rate is then likely to reduce
• a reason why ad slops downwards

  International Trade Effect:

  • A rise in the price level, assuming no change in foreign prices and the exchange rate will make the country's products less internationally competitive. This would cause households and firms to buy from more foreign producers and less from domestic producers. Net exports would fall and AD would contract.
• Real National Income = Real National

  Output = Real National Expenditure
• Average Propensity To Consume (APC) - The proportion of disposable income spent. It is consumption divided by income
• APC = consumption

  income
• Average Propensity To Save - The proportion of disposable income saved. It is saving divided by income.
• APS = -

  savings income
• Marginal Propensity To Consume - The proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it.
• Marginal Propensity To Save - The proportion of an aggregate raise in pay that a consumer uses on saving rather than on the consumption of goods and services.
• Multiplier Efect - The process by which any change in a component of aggregate demand results in a greater final change in real GDP.
• Multiplier Efect - The process by which any change in a component of aggregate demand results in a greater final change in real GDP.
• • SRAS assumes that the level of capital is fixed (in the short run you can't build a factory). In the short run an increase in the price of goods, encourages firms to take on more workers, pay slightly higher wages and produce more as it is now more profitable. So the SRAS curve (by itself) suggests that an increase in prices leads to a temporary increase in output as firms employ more workers. This means that SRAS supply shifts when there are any sort of changes in the costs of production such as a fall in wage rates.
• LRAS on the other hand is determined by all the factors of production - size of workforce, size of capital stock, levels of education (quality of labour) and labour productivity. This means that any change in the quantity or quality of resources would shift the LRAS right.
• Economic Growth - In the short run, an increase in real GDP, and in the long run, an increase in productive capacity, that is, in the maximum output that the economy can produce
• Unemployment - A situation where people are out of work but are willing and able to work
• Labour Force - The people who are employed and unemployed, that is, those who are economically

  dolv
• Economically Inactive - People of working age who are neither employed nor unemployed
• Deflation - A sustained fall in the general price level
• Balance Of Payments - A record of money flows coming in and going out of a country
• Inflation Rate - The percentage increase in the price level over a period of time
• Government Economic Policy Objectives:Economic Stability:

  Sustainable Economic Growth

  High Employment / Low Unemployment

  Low and Stable Inflation

  Satisfactory Balance of Payments
• economic stability is

  • Absence of fluctuations in the economy
  • Absence of booms and bust / absence of economic or trade cycle.
  • Avoidance of volatility in - economic growth rates, inflation, employment, exchange rates
• Sustainable Economic Growth - Economic growth that can continue over time and does not endanger future generations' ability to expand productive capacity
• tend yan w ipe elinceine in potentil orput over time. a measure of how fast the