11 - Economic Performance Definitions Flashcards
External Shocks
Unanticipated occurrences in an economy, changing the direction of an economy.
Foreign Direct Investment
The flow of capital from one country to another, to gain a lasting interest in enterprise.
Human Capital
The economic value of a workers’ skills and experience.
Hysteresis
An economic event which persists into the future, after factors which caused it are removed.
Infrastructure
The systems of a business, region, or nation, involving the transportation of goods.
Net Inward Migration
The difference between people entering and leaving a country.
Positive Output Gap
When actual output is more than full capacity output.
Negative output gap
When output is less than what an economy can produce at full capacity.
Productivity
How much output can be produced with a certain set of inputs.
Research and Development
Businesses gathering knowledge to discover new ways to improve their products.
Stagflation
A mix of high inflation, and zero or negative growth.
Sustainable Growth
Growth of output meeting the needs of the present without compromising the ability of future generations.
Innovation
The act of improving existing products.
Short Run Growth
Increase in GDP through an increase in AD.
Long Run Growth
An increase in the productive capacity of an economy.
Productive Capacity
The maximum possible output of an economy.
Economic Cycle
The way an economy goes through the four stages of Boom, Slowdown, Recovery, and Recession.
Boom
A short lived period of rapid economic growth.
Slowdown
A steady decline of a country’s output, with a rise in unemployment.
Recession
Two consecutive quarters of negative GDP growth, with high unemployment.
Recovery
An economy starting to expand, with falling unemployment and rising disposable incomes.
Trend Growth Rate
The average sustainable rate of economic growth.
Frictional Unemployment
Unemployment caused by workers seeking a better job, or being between jobs. Mainly affects new entrants to the labour market.
Transitional Unemployment
Individuals voluntarily choosing to leave their job, in search of a new one.
Geographical Immobility of Labour
Barriers that people face moving from one area to another.
Occupational Immobility of Labour
The inability of Labour to move, because of insufficient skills.
Structural Unemployment
Caused by a lack of suitable skills for jobs available, as a result of things such as de-industrialisation.
De-Industrialisation
A process of economic change, by the removal of industrial capacity in a country.
Cyclical Unemployment
Involuntary unemployment due to a lack of Aggregate Demand for goods and services.
Keynesian Unemployment
Inadequate overall demand leading to prolonged periods of high unemployment.
Demand Deficient Unemployment
Occurs during economic downturns, due to consumers and businesses reducing spending.
Seasonal Unemployment
Unemployment arising in different seasons of the year, caused by factors such as weather.
Real Wage
Wages adjusted for inflation, in terms of the amount of goods and services that can be bought.
Real Wage Unemployment
A theory which states that unemployment is caused by real wages being too high relative to the productivity of workers.
Voluntary Unemployment
Occurs when workers are willing to work at current market wage rates, but they choose to remain unemployed, refusing job offers.
Involuntary Unemployment
Occurs when workers are willing to work at the current wage rate, but there are no jobs available.
Equilibrium Unemployment
Assumes that firms and workers maximise their payoffs, and wages are determined to exploit private gains.
Natural Rate of Unemployment
The level of unemployment that occurs in an economy, when operating at full potential.
Demand - Pull Inflation
Demand for goods and services exceeds the available supply of the goods and services available in the economy.
Cost - Push Inflation
Overall prices rise due to increases in production costs such as wages and raw materials.
Wage Cost Inflation
Wage increases causing inflation because the cost of producing goods and services goes up as companies pay their employees more.
Import - Cost Inflation
Increases in the prices of imported fuels, materials and components increase domestic costs of production, leading to increases in the price of domestically produced goods.
Emerging - Market Inflation
Inflation from emerging economies who’s main exports are manufactured goods.
Disinflation
A fall in the rate of inflation, not a fall in prices.
Monetarists
Believe that money supply is the primary factor affecting demand in an economy.
Quantity Theory of Money
States that the general price level of goods and services is directly proportional to the amount of money in circulation.
Equation of Exchange
MV = PT.
