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7 Cards in this Set
- Front
- Back
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All economic activity revolves around?
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Production of output
Earning of income Spending of income (expenditure) |
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Consumption
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Income is exchanged for goods and services
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Financial Sector
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Link between savers and investors (money saved is borrowed by firms wanting to invest).
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Government sector
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Raises revenue from taxes and charges. Spends to provide g & s for the community
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G1
G2 |
G1- expenditure on current e.g. wages
G2- expenditure on capital or investment goods expected to provide revenue in the future e.g. schools, hospitals |
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Define macroeconomic equilibrium
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Occurs when the desired level of expenditure exactly equals the level of output produced and the income earned from that production
No tenedancy to change. |
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I > S
I = S I > S |
I > S then the economy will expand and O, Y, E will increase
I = S then the economy is in eqilibrium and there will be no change E = O = Y I < S then the economy will contract and O, Y, E will decrease |
