The Uk Economy - Performance And Policies Part 1

Front 1

Microeconomics

Back 1

The study of individuals, households and firms' behaviour in decision making and allocation of resources. Generally applies to markets of goods and services to deal with individual in economic issues.

Front 2

Macroeconomics

Back 2

The branch of economics that studies the behaviour and performance of an economy as a whole. It focuses on the aggregate changes in the economy such as unemployment, growth rate, GDP and inflation.

Front 3

GDP

Back 3

Value of goods and services produced in a country in one year.

Front 4

Macroeconomic objectives

Back 4

Main

1 - Economic growth

2 - Employment/unemployment

3 - Inflation

4 - Balance of Payments Current Account

Other

5 - Equality/income distribution

6 - Protection of the environment

Front 5

Aggregate

Back 5

Adding everything together.

Front 6

Aggregate demand

Back 6

The total demand for goods and services within a particular market.

Front 7

Aggregate demand formula

Back 7

C + I + G + (X - M)

Consumption + Investment + Government + (Exports - Imports)

Front 8

Consumption

Back 8

Consumer spending on goods and services that are purchased because they create utility/welfare in their own right.

Front 9

Two categories that consumer goods can be divided into

Back 9

1. Durable = consumed over a long time e.g. car, TV, fridge

2. Non-durable = consumed immediately e.g. food

Front 10

Determinants of consumption

Back 10

1. Real/disposable income

2. Credit availability

3. Expectations/confidence of personal economic activity

4. Wealth

5. Interest rates

6. Direct taxes

7. Distribution of income

Front 11

Consumption - Real/disposable income

Back 11

1. Real = after taxes

2. Disposable = after necessities

Front 12

Consumption - Credit availability

Back 12

1. Consumer durables

2. Credit cards (borrowing money)

- availability

- limit

- interest rate

Front 13

Consumption - Expectations/confidence of personal economic activity

Back 13

1. Confident = consumption high/rising

2. Not confident = consumption low/lowering

3. Expectations of inflation

4. Unemployment rates

Front 14

Consumption - Wealth

Back 14

1. Value of all assets (can be sold to generate money)

2. Can increase over time (leads to higher consumption

3. Includes houses, savings, bank account

Front 15

Consumption - Interest rates

Back 15

May cause concerns with mortgages

Front 16

Consumption - Direct taxes

Back 16

- NIC

- Income tax

- Affects disposable income

Front 17

Consumption - Distribution of income

Back 17

1. People who are well off are able to spend or save

2. If there is redistribution, consumption is likely to be higher than if there are fewer, richer people

Front 18

Average propensity to consume

Back 18

- proportion of total income spent

- total consumption / total income

Front 19

Average propensity to save

Back 19

- proportion of total income saved

- total savings / total income

Front 20

Marginal propensity to consume

Back 20

- proportion of a change in income which is spent

- change in total consumption / change in total income

Front 21

Marginal propensity to save

Back 21

- proportion of a change in income which is saved

- change in total saving / change in total income

Front 22

Consumption definition

Back 22

Total expenditure by households on goods and services over a period of time.

Front 23

Consumption function

Back 23

The relationship between the consumption of households and the factors which determine it.

Front 24

Investment

Back 24

The purchase of goods that are not consumed today but are used in the future to create wealth

Front 25

Determinants of investment

Back 25

1. State of the economy and future expectations

2. How attractive it is to invest in the economy (taxes, currency, resources e.g. skilled labour and low wages)

3. Cost of borrowing (e.g. interest rates and whether lenders are willing to lend)

4. Government encouragement (e.g. subsidies, infrastructure, tax incentives)

5. Dependence of certainty levels

Front 26

Accelerator coefficient

Back 26

Capital-output ratio

Front 27

Accelerator theory

Back 27

The theory that the level of investment is related to past changes in income.

Front 28

Animal spirits

Back 28

Business confidence: the mood of managers and owners of firms about the future of their industry and the wider economy.

Front 29

Capital-output ratio

Back 29

The ratio between the amount of capital needed to produce a given quantity of goods and the level of output.

Front 30

Depreciation (of the capital stock) or capital consumption

Back 30

The value of the capital stock which has been used up or worn out.