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Economics revision (Macroeconomic Objectives (Economic growth (L&MIC--…
Economics revision
Macroeconomic Objectives
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Income distribution
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Inequality is - b/c everyone in societry should have should have access to a certain standard of living
Economic growth
L&MIC-- Moving large numbers of worker from low-productivity agriculture to higher-productivity manufacturing
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Inflation and deflation
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governments want to avoid deflation as it has coorelations with recession and low or negative economic growth
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Circular flow of income
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Definition
It is a model of the economy that shows the flow of goods, Services and factors and their payments around the economy.
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Moral hazards
Moral Hazard is when an economic agent makes a decision in their own best interest knowing that there are potential negative risks , and that if problems result, the cost will be partly paid by the other economic agents.
It arises when both parties have asymmetric information (where buyers and sellers have different amounts of information, with one group having more than the other) about achother.
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Banks want to take risks beacuse often risk leads to higher proft and benefir. However, it risk fails it can lead to bankruptcy
Some banks are 'too big to fail' which means that the cost to the economy if huge if it fails beacuse people lose jobs, savings, investros etc.-
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