Macroeconomics Definitions Flashcards

Questions and Answers

What is the definition of Macroeconomics?

The study of individual economic agents

The management of government finances

The analysis of market structures

The study of aggregate economic activity (correct)

What does the Circular flow of income model illustrate?

The relationship between saving and consumption

The flow of capital between countries

The distribution of income among households

The flow of money through the economy (correct)

What are leakages in the context of macroeconomics?

Income received by households that is not used to finance domestic goods and services.

What are injections?

Income received by firms not directly from household spending. Signup and view all the answers

How are savings defined in macroeconomics?

Income that is not spent but stored in a financial institution. Signup and view all the answers

What is a transfer payment?

A payment received without a productive service being rendered. Signup and view all the answers

What is national income?

The total value of all final goods and services produced in an economy during a certain period. Signup and view all the answers

What does Gross Domestic Product (GDP) represent?

The total monetary value of all final goods and services produced in a country in one year. Signup and view all the answers

Define Gross National Product (GNP) or Gross National Income (GNI).

The total monetary value of all final goods and services produced in an economy in one year, plus net property income from abroad. Signup and view all the answers

What is Net National Product (NNP) or Net National Income (NNI)?

The total monetary value of all final goods and services produced, plus net property income from abroad, minus depreciation. Signup and view all the answers

What is nominal GDP?

The total monetary value of all goods and services produced in a country in one year, not adjusted for inflation. Signup and view all the answers

What is real GDP?

The total monetary value of all goods and services produced in a country in one year, adjusted for inflation. Signup and view all the answers

Define per capita GDP.

The total money value of all final goods and services produced in a country in one year divided by the size of the population. Signup and view all the answers

What is Green GDP?

A measure of GDP that accounts for environmental costs incurred from production. Signup and view all the answers

What does economic growth entail?

The growth of real output in an economy over time, typically measured by real GDP growth. Signup and view all the answers

What is economic development?

A multidimensional concept involving improvements in standards of living, poverty reduction, health, education, and equality. Signup and view all the answers

What is the Human Development Index (HDI)?

A composite index that measures health, education, and living standards. Signup and view all the answers

What is the business cycle?

Fluctuations in economic activity in an economy over time, shown by changes in real GDP. Signup and view all the answers

What defines a recession?

Two consecutive quarters of negative GDP growth. Signup and view all the answers

What is aggregate demand?

The total spending on goods and services in an economy. Signup and view all the answers

How is consumption defined in macroeconomics?

Spending by individuals or households on domestic goods and services over a period of time. Signup and view all the answers

Define investment in macroeconomic terms.

Spending by firms on the addition of capital stock to the economy. Signup and view all the answers

Study Notes

Macroeconomics Overview

Macroeconomics studies aggregate economic activity, focusing on the economy's overall functioning.

Circular Flow of Income

A simplified economic model illustrating the monetary flow throughout the economy.

Leakages

Income that households receive but do not spend on domestic goods and services, including taxes, savings, and imports.

Injections

Income for firms that originates outside household spending, such as government expenditures, investments, and export revenue.

Savings

Income that is stored rather than spent; categorized as a leakage from the circular flow of income.

Transfer Payments

Payments received without a corresponding productive service, leading to no increase in output, e.g., pensions and unemployment benefits.

National Income

The total value of final goods and services produced within an economy over a specified period, typically one year.

Gross Domestic Product (GDP)

Represents the total monetary value of all final goods and services produced in a country annually; expressed as GDP = C + I + G + (X - M).

Gross National Product/Income (GNP/GNI)

Total value of all final goods and services produced in a year plus net property income from abroad.

Net National Product/Income (NNP/NNI)

Total value of goods and services produced in a year, plus net property income from abroad, minus depreciation.

Nominal GDP

The monetary value of all goods and services produced in a year, unadjusted for inflation.

Real GDP

The monetary value of all goods and services produced in a year, adjusted for inflation.

Per Capita GDP

Calculated by dividing the total GDP by the population size, providing an average economic output per person.

Green GDP

GDP measure adjusted for environmental costs associated with production; calculated as GDP minus environmental costs.

Economic Growth

Refers to the increase in real economic output over time, typically measured by the growth rate of real GDP.

Economic Development

A multidimensional concept focusing on improved living standards, poverty reduction, enhanced health and education, and increased employment opportunities.

Human Development Index (HDI)

A composite index reflecting health (life expectancy), education (literacy and school enrolment), and living standards (GDP per capita), scored between 0 and 1.

Business Cycle

Represents the cyclical fluctuations in economic activity, indicated by changes in real GDP, with stages including boom, peak, recession, trough, and recovery.

Recession

Defined by two consecutive quarters of negative GDP growth; usually correlated with increased unemployment and lower inflation rates.

Aggregate Demand

The total spending within the economy for goods and services, calculated as the sum of consumption, investment, government spending, and net exports.

Consumption

Expenditure by households on domestic goods and services over a specified duration.

Investment

Spending by businesses to enhance capital stocks, including new factories and machinery.

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Description

This quiz features a series of flashcards designed to help you master key terms in macroeconomics. Each card includes a definition, providing a concise overview of important concepts such as the circular flow of income and leakages. Ideal for quick revision and testing your understanding of macroeconomic principles.