The National Economy
Chap1: The National Economy
I. THE SCOPE OF MACROECONOMICS
the major macroeconomics issues
Economic growth; governments try to achieve high rates of economic growth economies suffer from inherent instability. As a result, economic growth and other macroeconomic indicators tend to fluctuate.
Rate of eco growth: the percentage increase on national output, normally expressed over a 12 month period.
Unemployment waste of human resources, unemployment benefits are a drain on gov revenues.
Inflation
A general rise in prices throughout the economy.
Gov aim is to keep inflation both low and stable: to aid the process of decision making (able to set prices and wages rates, and make investment decisions with far more confidence).
Rate of inflation: percentage increase in prices over a 12-month period.
The balance of payment and the exchange rate
A country's balance of payments account records all transactions between the residents of that country and the rest of the world. These transactions enter as either debit items or credit items. The debit items include all payments TO other countries. The credit items includes all receipts FROM other countries.
Balance of payments account: A record of the country's transactions with the rest of the world. It shows the country's payments to or deposits in other countries (debits) and it receipts or deposits from other countries (credits). It also shows the balance between these debits and credits under various headings.
The sale of exports and any other receipts earn foreign currency. The purchase of imports or any other payments abroad use up foreign currency. If we start to spend more foreign currency than we earn, one of the two things must happen. Both are likely to be a pb: Balance of payment will go into deficit → Shortfall (deficit) of foreign currencies. Gov will have to borrow money from abroad, or drawn its foreign currency reserves to make up the shortfall. Pb because: if it goes on too
I. THE SCOPE OF MACROECONOMICS
the major macroeconomics issues
Economic growth; governments try to achieve high rates of economic growth economies suffer from inherent instability. As a result, economic growth and other macroeconomic indicators tend to fluctuate.
Rate of eco growth: the percentage increase on national output, normally expressed over a 12 month period.
Unemployment waste of human resources, unemployment benefits are a drain on gov revenues.
Inflation
A general rise in prices throughout the economy.
Gov aim is to keep inflation both low and stable: to aid the process of decision making (able to set prices and wages rates, and make investment decisions with far more confidence).
Rate of inflation: percentage increase in prices over a 12-month period.
The balance of payment and the exchange rate
A country's balance of payments account records all transactions between the residents of that country and the rest of the world. These transactions enter as either debit items or credit items. The debit items include all payments TO other countries. The credit items includes all receipts FROM other countries.
Balance of payments account: A record of the country's transactions with the rest of the world. It shows the country's payments to or deposits in other countries (debits) and it receipts or deposits from other countries (credits). It also shows the balance between these debits and credits under various headings.
The sale of exports and any other receipts earn foreign currency. The purchase of imports or any other payments abroad use up foreign currency. If we start to spend more foreign currency than we earn, one of the two things must happen. Both are likely to be a pb: Balance of payment will go into deficit → Shortfall (deficit) of foreign currencies. Gov will have to borrow money from abroad, or drawn its foreign currency reserves to make up the shortfall. Pb because: if it goes on too