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18 Cards in this Set
- Front
- Back
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What’s national income |
The sum of all production and a measure of economic activity > Economic activity often measured in GDP but is not economic activity to the T.evo > as firms grow over time, National income + |
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What’s Economic growth |
Growth is calculated using change in national income (GDP) > If economy is growing then growth is positive and unemployment is falling - developing countries tend to grow at a faster rate than advanced economies who are slower maybe cuz of economic volatility e.g France |
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Inflation |
Since the introduction of independent central banks in 1992- many developed economies have achieved price stability ( till recently) |
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Zimbabwe inflation |
Their annual inflation reached 231 million % in 2008 ( ££ + 96% per day) > unemployment + to 80%
• however it fell to 5.6% per annum by 2011. |
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Inflation in Venezuela |
80,000% in 2018 and 10,000,000% (2019) |
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How do we use GDP to measure national income? |
• Sum of all production •Sum of all Income •the sum of all expenditure |
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What are “other incomes” |
Also known as mixed incomes Ie turnovers of non incorporated small business, farms and income from investments like interest incomes |
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Circular flow of income |
All equal to one another because they are all growing at the same rate |
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Real GDP |
GDP is the value of all final goods and services produced DOMESTICALLY - so real measures these values using current prices - changes to real GDP can only be due to changes in quantities |
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Nominal GDP |
Measures values using current prices- changes in nominal GDP can be due to changes in prices or changes in quantities out output |
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Actual VS potential growth |
The increase in actual observed output vs the increase in an economies capacity |
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Business cycle |
Expansion Peaking out Slowdown Recession Caused by AD and economic shocks |
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Calculating National income using production function |
Y = F (K , L) L= Labour K= capital ^ an increase in either of these will increase Y ***As we keep on increasing labour - it’s productivity diminishes. So we call this law of diminishing returns |
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Marginal product of labour |
MPL= ^ in Y / ^ in L
This is the additional production that results from one additional unit of labour - so we can get long run growth by increasing marginal product of labour or capital |
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Calculating National income using production function |
Y = F (K , L) L= Labour K= capital ^ an increase in either of these will increase Y ***As we keep on increasing labour - it’s productivity diminishes. So we call this law of diminishing returns |
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Marginal product of labour |
MPL= ^ in Y / ^ in L
This is the additional production that results from one additional unit of labour - so we can get long run growth by increasing marginal product of labour or capital |
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Economic policies to achieve economic growth : Demand side policies ( short run) |
• increasing Gov spending • lowering taxes • monetary policy |
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Kate donut model says there are critical planetary boundaries ie climate change etc that are violated by society. There is a ceiling that we can achieve society function and protect earth but we need to find it . |
Back (Definition) |
