OCR A-LEVEL ECONOMICS: MACROECONOMICS STUDY GUIDE
1. abbreviations used in this set
: F.O.Ps/FOPs - factors of production
AD - aggregate demand
AS - aggregate supply
SRAS - short run aggregate supply
LRAS - long run aggregate supply
MPS - marginal propensity to ssve
MPC - marginal propensity to consume
GDP - gross domestic product
C - consumption
I - investment
G - government spending
X - exports
M - imports
(X-M) - net exports
C.O.P/COP - cost of production
RDY - real disposable income
YFE - full employment level of output
RnD - research and development
DDL - derived demand for labour
FDI - foreign direct investment
2.what is GDP?
: the value of output produced by F.O.Ps in an economy over a given period of time.
, OCR A-LEVEL ECONOMICS: MACROECONOMICS STUDY GUIDE
3.what is aggregate demand (AD)?
: The total demand for goods and services at a given price level and over a given time
period within an economy.
4.it is important to remember that aggregate demand is a measure of spending so when
addressing it, address the value of goods and services, not just the quantity
5.what are the components of aggregate demand?
: Consumption (c),
Investment (I),
Government Spending (G),
Net Exports (X-M)
6.why is aggregate demand downward sloping?
: wealth effect, interest rate effect, trade effect
7.explain the wealth effect
: - average price level decreases
- real value of wealth increases
- people feel better off
- increase in spending
- more output needed to meet increases in demand - extension of AD
[essentially a change in the purchasing power of incomes]
, OCR A-LEVEL ECONOMICS: MACROECONOMICS STUDY GUIDE
8. explain the trade effect
: - price level decreases
- exports become more competitive, imports become less competitive
- demand for exports increases
- demand for imports decreases (domestic goods and services are now more competitive)
- value of (X-M) increases, AD extension
[(X-M) changes as a result of price level changes --> thats why its an extension and not a
shift]
9. what causes shifts in aggregate demand?
: a change in any factor of aggregate demand.
10. what is marginal propensity to consume (MPC)?
: how a change in income influences your spending.
11. how do you calculate MPC?
: change in consumption/change in income
12. what are the macroeconomic indicators?
: - growth
- unemployment
- inflation
- trade position
1. abbreviations used in this set
: F.O.Ps/FOPs - factors of production
AD - aggregate demand
AS - aggregate supply
SRAS - short run aggregate supply
LRAS - long run aggregate supply
MPS - marginal propensity to ssve
MPC - marginal propensity to consume
GDP - gross domestic product
C - consumption
I - investment
G - government spending
X - exports
M - imports
(X-M) - net exports
C.O.P/COP - cost of production
RDY - real disposable income
YFE - full employment level of output
RnD - research and development
DDL - derived demand for labour
FDI - foreign direct investment
2.what is GDP?
: the value of output produced by F.O.Ps in an economy over a given period of time.
, OCR A-LEVEL ECONOMICS: MACROECONOMICS STUDY GUIDE
3.what is aggregate demand (AD)?
: The total demand for goods and services at a given price level and over a given time
period within an economy.
4.it is important to remember that aggregate demand is a measure of spending so when
addressing it, address the value of goods and services, not just the quantity
5.what are the components of aggregate demand?
: Consumption (c),
Investment (I),
Government Spending (G),
Net Exports (X-M)
6.why is aggregate demand downward sloping?
: wealth effect, interest rate effect, trade effect
7.explain the wealth effect
: - average price level decreases
- real value of wealth increases
- people feel better off
- increase in spending
- more output needed to meet increases in demand - extension of AD
[essentially a change in the purchasing power of incomes]
, OCR A-LEVEL ECONOMICS: MACROECONOMICS STUDY GUIDE
8. explain the trade effect
: - price level decreases
- exports become more competitive, imports become less competitive
- demand for exports increases
- demand for imports decreases (domestic goods and services are now more competitive)
- value of (X-M) increases, AD extension
[(X-M) changes as a result of price level changes --> thats why its an extension and not a
shift]
9. what causes shifts in aggregate demand?
: a change in any factor of aggregate demand.
10. what is marginal propensity to consume (MPC)?
: how a change in income influences your spending.
11. how do you calculate MPC?
: change in consumption/change in income
12. what are the macroeconomic indicators?
: - growth
- unemployment
- inflation
- trade position
