8. The Trade Cycle Flashcards
How do you calculate the balance of trade?
Export revenue less the cost of imports.
What is inflation?
An increase in the general level of prices of goods and services in the economy.
What does a governments fiscal policy relate to?
Taxation, public borrowing and spending.
What is a trade cycle?
A repeated pattern of changes in economic growth.
What are the 4 stages of the trade cycle?
Recession, Depression, Recovery and Boom.
What are the three main economic policy tools?
Fiscal and monetary policy and supply side policy.
Describe how the automatic stabilisers lessen the need for direct government initiatives to support aggregate demand during a recession.
The automatic effect of the trade cycle causes total spending (injection) to rise and taxation of income (withdrawals) to fall.
What is cyclical unemployment.
The type of unemployment caused by a decline in the general level of economic activity.
Define structural unemployment.
The long term unemployment that exist even when the economy is growing at a normal rate. It may be due to a lack of skills or lack or appropriate skills, or due to wages being set at an artificially high level.
Define fictional unemployment.
The short term unemployment due to the time it takes workers to find jobs or due to seasonal factors.
What is demand pull inflation?
The type of inflation that is caused by an increase in the general level of economic activity is called demand-pull inflation.
What is cost-push inflation?
When firms are forced to increase prices because of of a general increase in their cost.
What does a government control with fiscal policy?
Taxation government spending and public borrowing
Which Macroeconomic policy instrument do interest rates fall under?
Monetary policy
