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Flashcards in Macroeconomics Deck (49)
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1

Macroeconomics

Studies whole economy, focus on why it grows/why activity fluctuates

2

Households

Owners of productive resources, buyers of final goods and services

3

Firms

Employers of resources, produce goods and services for economy

4

Real flow

Flow of goods, services and resources

5

Money flow

Flow of spending and income

6

Factor market

Firms hire resources from households in exchange for income

7

Product market

Households/firms spend income on goods and services

8

Interdependent

We all depend on each other to provide goods and services to satisfy wants/needs

9

Capital market

Mediator between savers and investors

10

Savings

Portion of income not spent on goods and services for CURRENT consumption

11

Leakage

Reduces flow of money through the economy

12

Investment

Expenditure on capital goods to use in production

13

Injection

Money put back into the economy that offsets leakages

14

Transfer payment

Government provision of social welfare (e.g. Pension, job search/Childcare allowances)

15

Taxation

Money paid to the government by households

16

Government expenditure

Return flow of taxation from the government for capital or current goods

17

Open economy

A economy that allows overseas trade

18

Why trade?

Allows items from overseas that cannot be produced in the domestic economy

19

Import

Money flow from Australia to overseas, higher because labour is more expensive in Australia

20

Export

Money flow from overseas to Australia

21

Why do capital markets exist?

To match household needs with surplus income/firms borrowing for investment

22

Government sector

Provides for community needs financed by taxation

23

Macroeconomic equilibrium

ΣO=ΣY=ΣE (sum of output = sum of income = sum of expenditure)

24

When is capital market at equilibrium?

S=I (savings = investment)

25

What happens when leakages exceed injections?

Economy contracts; spending

26

Disequilibrium

Inequality of savings/investment

27

Equilibrium of circular flow

S+T+M=I+G+X

28

Durable good

Expected to provide satisfaction for 3+ years

29

White goods

Fridge, washing machine, oven, etc

30

Brown goods

Furniture, carpets, etc