AS EXAM DEFINITIONS

Question 1

Define accelerator

Answer 1

Change in the level of investment in new capital goods induced by a change in the rate of growth of national income

Question 2

Define multiplier

Answer 2

Relationship between a change in a component of AD resulting in a larger than proportional increase in real national income

Question 3

Define aggregate demand

Answer 3

Total planned spending on real output that produced wishing the economy

Question 4

Define aggregate supply

Answer 4

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

Question 5

Define consumption

Answer 5

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

Question 6

Define economic cycle

Answer 6

Upswing and downside in aggregate economic cycle over a time period

Question 7

Define exports

Answer 7

Domestically produced goods/services sold to residents of other countries

Question 8

Define investment

Answer 8

Total planned spending by firms on capital goods in the economy

Question 9

Define injection

Answer 9

Spending entering the circular flow of income (investment, gov spending, exports)

Question 10

Define long run aggregate supply

Answer 10

AS when the economy is producing at its production potential, if more factors of production become available shifting LRAS right

Question 11

Define long run economic growth

Answer 11

An increase in the economies potential level of real output

Question 12

Define saving

Answer 12

Income which is not spent

Question 13

Define short run aggregate supply

Answer 13

AS when the level of capital is fixed through the level of factors of production

Question 14

Define short run economic growth

Answer 14

Growth of real output resulting from using unemployed resources

Question 15

Define cost push inflation

Answer 15

A rising price level caused By an increase in costs of production (shifts SRAS left)

Question 16

Define deflation

Answer 16

Persistent fall in the average price level

Question 17

Define demand pull inflation

Answer 17

A rising price level caused by an increase of AD shifting the curve right

Question 18

Define disinflation

Answer 18

When the rate of inflation is falling but the price level is still positive

Question 19

Define inflation

Answer 19

A persistent rise in the average price level

Question 20

Define cyclical unemployment

Answer 20

Caused by a lack of AD in the economy (occurring in recession/depression)

Question 21

Define frictional unemployment

Answer 21

Short term unemployment usually occurring when someone switches between jobs

Question 22

Define full employment

Answer 22

3% or less of the labour force unemployed

Question 23

Define geographical immobility of labour

Answer 23

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

Question 24

Define involuntary unemployment

Answer 24

When workers are willing to work at current market wage rates but there are no available jobs

Question 25

Define occupational immobility of Labour

Answer 25

When workers are unwilling/unable to mover from one type of job to another because another type of skill is needed

Question 26

Define seasonal unemployment

Answer 26

Unemployment arising in different seasons of the year (eg. Weather, Christmas)

Question 27

Define structural unemployment

Answer 27

Long term unemployment occurring when some industries are declining (even when others are growing) and when new skills are required for jobs

Question 28

Define balance of payments

Answer 28

Record of all the currency flows in and out of the country over a period of time

Question 29

Define balance of trade

Answer 29

Difference between the value of w country’s imports and exports

Question 30

Define balance of trade surplus

Answer 30

When money value of exports exceeds imports

Question 31

Define balance of trade deficit

Answer 31

Money value of imports exceeds exports

Question 32

Define current account balance of payments

Answer 32

Mesures all the currency flows in and out of a country over a period of time for imports and exports, income and transfer flows

Question 33

Define current account surplus

Answer 33

Exports exceed imports

Question 34

Define current account deficit

Answer 34

Imports exceed exports

Question 35

Define budget surplus

Answer 35

Occurs when gov spending is less than revenue - withdrawal from circ flow of income

Question 36

Define budget deficit

Answer 36

When gov spending exceeds revenue - injection into circ flow of income

Question 37

Define exchange rate

Answer 37

Price of a currency measured in terms of another currency eg. £-$

Question 38

Define fiscal policy

Answer 38

Use by the government of gov spending and taxation to try and achieve the governments policy objectives

Question 39

Define expansionary fiscal policy

Answer 39

Using fiscal policy to increase AD - shift curve right

Question 40

Define contractionary fiscal policy

Answer 40

Using fiscal policy to decrease AD - shifting it left

Question 41

Define monetary policy

Answer 41

Use of the government and its agents (bank of England) of monetary instruments to try and achieve the govs policy objectives

Question 42

Define contractionary monetary policy

Answer 42

Using monetary policy to decrease AD - shifting curves left

Question 43

Define expansionary monetary policy

Answer 43

Using monetary policy to increase AD - shifting it left

Question 44

Define rate of interest

Answer 44

Reward for lending savings to somebody else and the cost of borrowing

Question 45

Define supply side policy

Answer 45

Aim to improve national economic performance by creations competitive / more efficient markets through interventionist policies

Question 46

Define consumer price index

Answer 46

Official measure to calculate the rate of consumer price inflation in the UK

Question 47

Compare direct/indirect tax

Answer 47

Indirect-tax that can be shifted by the person legally liable to the tax into someone else
Direct- can’t be shifted

Question 48

Define distribution of income

Answer 48

Spread of income among individuals and different income groups in the economy

Question 49

Define gross domestic product

Answer 49

Sum of all goods/services or level of output in an economy over a period of time

Question 50

Define index number

Answer 50

Number used in an index to enable accurate comparisons