economic performance

• Economic growth refers to an increase in the production of goods and services in an economy over a given time period.
• Expansionary fiscal policy is used during recessions, while contractionary fiscal policy is used when inflation is high.
• Fiscal policy involves changing tax rates or government spending levels.
• The nominal interest rate measures the interest charged on a loan or paid on savings, before adjusting for inflation.
• Efficiency refers to how well an economy uses resources to produce output.
• The law of diminishing returns states that as more resources are added to a fixed amount of capital, the marginal product will eventually decline.
• The government can use expansionary fiscal policy by increasing public spending on infrastructure projects like roads, bridges, schools, hospitals, etc., which will create jobs and stimulate economic activity.
• Monetary policy involves adjusting interest rates or money supply by central banks.
• Another way the government can implement expansionary fiscal policy is through tax cuts, such as reducing income taxes or corporate taxes.
• Monetary policy involves setting interest rates by central banks.
• A recession is a fall in the GDP within 2 consecutive quarter (6 months).
• Net investment refers to the amount of incremental investment after allowing for the depreciation of capital goods.
• Scarcity refers to resources being finite.
• Market failure refers to issues that the free market causes which results in a misallocation of resources.
• Budget deficit refers to the government spending more than it receives.
• Budget surplus refers to the government receiving more than it spends.
• Balance of payments deficit is when an economy imports more than it exports so more money is flowing out of the economy.
• Balance of payments surplus is when there is more exports than imports so more money flows into the economy.
• Nominal refers to the actual value of the currency.
• Real refers to adjusting to inflation.
• Inflation refers to the sustained increase in the general price level.
• Working out the current account balance is exports-imports/GDP
• The 5 economic objectives set by the government are known with the acronym, TIGER: Trade (Balance of Payments), Inflation, Growth, unEmployment, and reduce (inequality and environmental impact).
• The injections into the circular flow of income are investment, government spending and exports.
• The withdrawals from the circular flow of income are savings, taxation and imports.
• Inflation can affect consumption because if inflation is increasing, people are more likely to spend now to avoid the depreciation of money losing its value.
• Gross investment refers to the total amount spent on capital goods.
• Investment refers to the planned purchases of capital goods by firms.
• Expansionary fiscal policy decreases taxes and increases government spending which leads to higher consumption. This shifts AD to the right.
• Expansionary monetary policy lowers interest rates which leads to less saving and more consumption which could also lead to higher investments. This shifts AD to the right.
• Contractionary fiscal policy increases taxes and lowers government spending which leads to lower consumption. This shifts AD to the left.