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Flashcards

6.2 ~ Aggregate Demand

Tara Pugal Economics AS - Level Inglês 44 flashcards

Flashcards do conjunto (44)

  1. 1What is consumer spending?spending by households on goods and services
  2. 2What is the biggest component of AD?C
  3. 3What are the main sources of consumer Y?wages
    savings
    investments
    pensions
    benefits
  4. 4What is the marginal propensity to consume? (MPC)the rate at which consumers increase their consumption as Y increases
  5. 5What is the marginal propensity to save? (MPS)the rate at which consumers increase their savings as Y increases
  6. 6What does the MPC + MPS always equal?1
  7. 7Which group of people generally have a higher MPS?people on lower Y
  8. 8What are factors that determine consumer spending? (6)real Y
    direct & indirect T
    ir
    household wealth
    consumer confidence
    distribution of Y
  9. 9How do real Y determine C?if people's wages rise faster than prices, real Y will increase = higher level of real purchasing power
  10. 10How does direct & indirect T determine C?if there is a cut in direct T, consumers will see ↑Y and spending power
    however if ↑T (indirect) = ↑P and ↓Y
  11. 11How do ir determine C?↓ir = cuts the cost of paying the debt on a mortgage and ↑the effective disposable Y of homeowners
  12. 12How does household wealth determine C?e.g. a sustained ↓P of houses may = ↓personal wealth, ↓C as homeowners have less housing equity available to borrow (this is the negative wealth effect)
  13. 13How does consumer confidence determine C?e.g. fears of ↑U and expectations of ↑T = ↓consumer confidence and encourages saving
  14. 14How does the distribution of Y determine C?lower Y families tend to have ↑MPC therefore a redistribution of Y towards poorer families may boost total consumer D
  15. 15What is the wealth effect?consumers tend to spend more when there is a market (in which share prices are rising) in widely-held assets like real estate or stocks, because rising asset prices make them feel wealthy
  16. 16What are the two types of consumer borrowing?unsecured
    secured
  17. 17What is unsecured borrowing?a loan/overdraft not tied to the value of another asset
  18. 18Give an example of unsecured borrowingstudent overdraft
    bank loan
  19. 19What is secured borrowing?lending where the borrower must use another asset as collateral for the loan
  20. 20Give an example of secured borrowinga mortgage with a bank/building society
  21. 21What is I?spending on K goods
  22. 22What is I an effecting factor of?competitiveness in a globalising world
  23. 23What is infrastructure?spending on new roads, wind farms, telecommunications etc by the private and public sectors
  24. 24What is the relationship between AD and I?↑I = positive multiplier effect (PME) = ↑AD
  25. 25How does I create and destroy jobs?creates jobs in producing, designing etc
    destroys jobs to be replaced with machinery
  26. 26What is the multiplier effect?when new injections of D for goods + services stimulate further rounds of spending = expansion of output, Y and profits
  27. 27What is a positive multiplier effect? (PME)when an initial increase in an injection (or a decrease in a leakage) = a greater final ↑GDP
  28. 28What is a negative multiplier effect? (NME)when an initial decrease in an injection (or increase in a leakage) = a greater final ↓GDP
  29. 29What does the multiplier effect require?sufficient spare capacity for extra output to be produced
  30. 30What is crowding out?where either ↑G or ↓T can = ↑gov borrowing and/or = ↑PL = ↑ir = ↓C/I = ↓AD = ↓GDP
  31. 31When will the multiplier effect be greater?MPS extra Y on domestic goods + services is high
    consumer confidence is high
    firms have the capacity to expand production to meet increases in D
  32. 32What happens when SRAS is highly elastic?the multiplier effect is likely to be high
  33. 33What happens when SRAS in inelastic?the harder is it for SRAS to expand to meet rising AD
  34. 34What is the accelerator effect?the relationship between planned I and the rate of change of national Y (GDP)
    (a surge in I by businesses when an economy is growing quite strongly
  35. 35Give an example of the accelerator effectwhere a given change in D for consumer goods+services = a bigger % change in D for K goods
  36. 36What is the negative accelerator effect?when the rate of growth of D in an industry slows, then net I fall
  37. 37What is the economic importance of infrastructure I? (3)potentially high multiplier effects
    lack of infrastructure may discourage FDI
    ↑K stock/productive potential
  38. 38What is the circular flow of income?the flows of goods + services and Y to factors of production
  39. 39What are injections into the circular flow?I
    X
    G
  40. 40What are withdrawals from the circular flow?savings
    T
    M
  41. 41When is an economy in equilibrium?when the rate of injections = the rate of withdrawals
  42. 42What does an ↑net injections do?↑GDP, ↑Y
  43. 43What does ↑net withdrawals do?↓GDP, ↓Y
  44. 44What happens when a gov is operating an ExFP and with a bigger budget deficit?G > T revenues (injections > leakages) = ↑GDP

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Descrição
AS - Level Economics (Macroeconomics) FlashCards sobre 6.2 ~ Aggregate Demand, criado por Tara Pugal em 23-04-2016.
Criado por
Tara Pugal
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