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Macroeconomics > AS definitions > Flashcards

AS definitions Flashcards

1
Q

Accelerator

A

A change in the level of investment in new capital goods induced by a change in the rate of national income or aggregate demand

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2
Q

Actual output

A

Level of real output produced in the economy in a particular year

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3
Q

Aggregate demand

A

The total planned spending on real output produced within the economy
C+I+G+(X-M)

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4
Q

Aggregate supply

A

The level of real national output that producers are prepared to supply at different average price levels

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5
Q

Availability of credit

A

Funds available for households and firms to borrow

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6
Q

Balance of payments/Current account

A

A record of all the currency flows into and out of a country in a particular time period

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7
Q

Balanced budget

A

Achieved when government spending equals government revenue

G=T

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8
Q

Bank of England

A

The central bank in the UK economy which is in charge of monetary policy

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9
Q

Bank rate

A

The rate of interest the Bank of England pays to commercial banks on their deposits held at the Bank of England

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10
Q

Budget deficit

A

Occurs when government spending exceeds government revenue

G>T

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11
Q

Budget surplus

A

Occurs when government spending is less than government revenue
G

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12
Q

Central bank

A

Controls the banking system and implements monetary policy on behalf of the government

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13
Q

Consumer price index (CPI)

A

The official measure used to calculate the rate of consumer price inflation in the UK. The CPI calculates the average price increase of a basket of 700 different consumer goods and services

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14
Q

Consumption

A

Total planned spending by households on consumer goods and services produced within the economy

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15
Q

Contractionsry fiscal policy

A

Uses fiscal policy to decrease aggregate demand shifting the AD curve left

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16
Q

Contractionary monetary policy

A

Uses higher interest rates and other monetary policy tools to decrease aggregate demand and to shift the AD curve left

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17
Q

Cost push inflation

A

A rising price level caused by an increase in the costs of production, shown by a shift in the SRAS curve to the left

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18
Q

Credit crunch

A

Occurs when there is a lack of funds available in the credit market, making it difficult for borrowers tho obtain financing, and leads to a rise in the costs of borrowing

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19
Q

Current account deficit

A

Exports less than imports

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20
Q

Current account surplus

A

Exports greater than imports

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21
Q

Cyclical unemployment

A

When there is a lack of AD in the economy and occurs when the economy goes into a recession

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22
Q

Deflation

A

A persistent continuing fall in the average price level

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23
Q

Deindustrialisation

A

The decline of manufacturing industries, together with coal mining

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24
Q

Demand side

A

Relates to the impact of changes in AD on the economy

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25
Q

Demand pull inflation

A

A rising price level caused by an increase in aggregate demand, shown by a shift in the AD curve to the right

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26
Q

Deregulation

A

Involves removing previously imposed regulations

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27
Q

Direct tax

A

A tax which cannot be shifted by the person legally liable to pay the tax onto someone else. They’re levied on income and wealth
Eg income tax

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28
Q

Disinflation

A

When the rate of inflation is falling, but still positive and the price level is rising slower than previously

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29
Q

Distribution of income

A

The spread of different incomes among individuals and different income groups in the economy

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30
Q

Economic cycle

A

Upswing and downside in aggregate economic activity taking place over 4 to 12 years

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31
Q

Economic performance

A

Success or failure in achieving economic policy objectives

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32
Q

Economic recovery

A

When short run economic growth takes place after a recession

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33
Q

Exchange rate

A

The price of a currency

Eg pound measured to other currencies such as US dollar/euro

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34
Q

Expansionary fiscal policy

A

Uses fiscal policy to increase aggregate demand and to shift the AD curve to the right

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35
Q

Expansionary monetary policy

A

Uses lower interest rates and other monetary instruments to increase aggregate demand and shift the AD curve to the right

36
Q

Exports

A

Domestically produced goods or services sold to residents of other countries

37
Q

Fiscal policy

A

The use by the government of government spending and taxation to try to achieve the governments policy objectives

38
Q

Frictional unemployment

A

Unemployment that is usually short term and occurs when a worker switches between jobs

39
Q

Full employment

A

When under 3% of the he labour force are unemployed

40
Q

Geographical immobility or labour

A

When workers are unwilling or unable to move from one area to another in search of work

41
Q

Gross domestic product (GDP)

A

The sum of all goods and services, or level of output produced in the economy over a period of time

42
Q

Imports

A

Goods or services produced in other countries and sold to residents of this country

43
Q

Index number

A

Base year = 100

Shows fluctuations/comparisons of values of per year

44
Q

Indirect tax

A

A tax which can be shifted by the person legally liable to pay the tax onto someone else. These are levied on spending
Eg VAT

45
Q

Inflation

A

A persistent or continuing rise in the average price level

Aimed at 2%

46
Q

Injection

A

Spending entering the circular flow of income as a result of investment, government spending and exports

47
Q

Investment

A

Total planned spending by firms on capital goods produced within the economy

48
Q

Involuntary unemployment

A

When workers are willing and able to work at the current wage rate but they’re no jobs available

49
Q

Labour force survey

A

A quarterly sample of households in the UK. Providing information on households labour status

50
Q

Long run aggregate supply (LRAS)

A

Aggregate supply when the economy is producing at its production potential.
Can be shifted right if more factors of production become available or productivity rises

51
Q

Long run economic growth

A

An increase in the economy’s potential level of real output and an outward movement of the economy’s PPF

52
Q

Economic growth

A

An increase in the goods and services produced within an economy over a period of time

53
Q

Marginal propensity to consume

A

The fraction of an increase in disposable income that people plan to spend domestically on consumer goods

54
Q

Monetary policy

A

The use by the government and its agent, the Bank of England, of interest rates and other monetary instruments to try to achieve the governments policy objectives

55
Q

Monetary policy committee (MPC)

A

Nine economists which meet monthly within the Bank of England to set the bank rate, interest rates and other aspects of monetary policy

56
Q

Money supply

A

The stock of money in the economy, made up of cash and bank deposits

57
Q

Multiplier

A

The relationship between a change in aggregate demand and the resulting usually larger change in national income

58
Q

National capital stock

A

The stock of capital goods, such as buildings and machinery, in the economy that has accumulated over time

59
Q

National debt

A

The stock of all past central government borrowing that has not been paid

60
Q

National income

A

The flow of new output produced in the economy in a particular period

61
Q

Natural rate of unemployment

A

Rate of unemployment when the aggregate labour market is in equilibrium

62
Q

Negative output gap

A

The level of actual real output in the economy is lower than the trend output level

63
Q

Nominal GDP

A

GDP measured at the current market prices, with inflation removed

64
Q

Occupational immobility of labour

A

When workers use unwilling or unable to move from one type of job to another
Eg different skills are needed

65
Q

Output gap

A

The level of actual real output in the economy greater or lower than the trend output level

66
Q

Phillips curve

A

Shows relationship between the rate of inflation and the rate of unemployment

67
Q

Policy conflict

A

When two policy objectives cannot both be achieved at the same time. The worse the performance in achieving the other

68
Q

Positive output gap

A

The level of actual real output in the economy is greater than the trend output level

69
Q

Price index

A

An index number showing the change in the basket of prices over a month, quarter or year

70
Q

Privatisation

A

Involves shifting ownership of state owned assets to the private sector

71
Q

Progressive taxation

A

If, as income rises, a larger proportion of income is paid in tax
Eg income tax

72
Q

Proportional taxation

A

When proportion of income payed in tax is the same as income increases
Eg

73
Q

Rate of interest

A

The reward for lending or borrowing money

Currently 0.5%

74
Q

Real GDP

A

A measure of all the goods and services produced in the economy, adjusted for inflation

75
Q

Real wage

A

The purchasing power of money wage

Real wage falls as inflation increases

76
Q

Real wage unemployment

A

Unemployment caused by real wages being stuck above the equilibrium real wage

77
Q

Recession

A

A fall in real GDP over 2 consecutive quarters of the year

78
Q

Regressive taxation

A

When the proportion of income tax falls as income increases

Eg VAT

79
Q

Saving

A

Income which is not spent

80
Q

Seasonal unemployment

A

Unemployment arising in different seasons of the year

Eg ski instructor

81
Q

Short run aggregate supply (SRAS)

A

Aggregate supply when the level of capital is fixed

82
Q

Structural unemployment

A

When a decline in industries leads to long term unemployment
Eg coal mining

83
Q

Supply side

A

Relates to changes in the potential output affected by the factors of production
Eg changes in the size of the labour force

84
Q

Supply side policies

A

Improving national economic performance by creating competitive and more efficient markets
Eg education and training

85
Q

Trend growth rate

A

The rate which output can grow sustainably without putting pressure on inflation

86
Q

Voluntary unemployment

A

When workers choose to remain unemployed and refuse job offers at the current market wage rates

Macroeconomics (2 decks)

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