AS EXAM DEFINITIONS Flashcards
Define accelerator
Change in the level of investment in new capital goods induced by a change in the rate of growth of national income
Define multiplier
Relationship between a change in a component of AD resulting in a larger than proportional increase in real national income
Define aggregate demand
Total planned spending on real output that produced wishing the economy
Define aggregate supply
Level of real national output that producers are prepared to supply at different average price levels
Define consumption
Total planned spending by households on consumer goods/services produced within the economy
Define economic cycle
Upswing and downside in aggregate economic cycle over a time period
Define exports
Domestically produced goods/services sold to residents of other countries
Define investment
Total planned spending by firms on capital goods in the economy
Define injection
Spending entering the circular flow of income (investment, gov spending, exports)
Define long run aggregate supply
AS when the economy is producing at its production potential, if more factors of production become available shifting LRAS right
Define long run economic growth
An increase in the economies potential level of real output
Define saving
Income which is not spent
Define short run aggregate supply
AS when the level of capital is fixed through the level of factors of production
Define short run economic growth
Growth of real output resulting from using unemployed resources
Define cost push inflation
A rising price level caused By an increase in costs of production (shifts SRAS left)
Define deflation
Persistent fall in the average price level
Define demand pull inflation
A rising price level caused by an increase of AD shifting the curve right
Define disinflation
When the rate of inflation is falling but the price level is still positive
Define inflation
A persistent rise in the average price level
Define cyclical unemployment
Caused by a lack of AD in the economy (occurring in recession/depression)
Define frictional unemployment
Short term unemployment usually occurring when someone switches between jobs
Define full employment
3% or less of the labour force unemployed
Define geographical immobility of labour
When workers are Unwilling or unable to move from one area to another in search of work
Define involuntary unemployment
When workers are willing to work at current market wage rates but there are no available jobs
Define occupational immobility of Labour
When workers are unwilling/unable to mover from one type of job to another because another type of skill is needed
Define seasonal unemployment
Unemployment arising in different seasons of the year (eg. Weather, Christmas)
Define structural unemployment
Long term unemployment occurring when some industries are declining (even when others are growing) and when new skills are required for jobs
Define balance of payments
Record of all the currency flows in and out of the country over a period of time
Define balance of trade
Difference between the value of w country’s imports and exports
Define balance of trade surplus
When money value of exports exceeds imports
Define balance of trade deficit
Money value of imports exceeds exports
Define current account balance of payments
Mesures all the currency flows in and out of a country over a period of time for imports and exports, income and transfer flows
Define current account surplus
Exports exceed imports
Define current account deficit
Imports exceed exports
Define budget surplus
Occurs when gov spending is less than revenue - withdrawal from circ flow of income
Define budget deficit
When gov spending exceeds revenue - injection into circ flow of income
Define exchange rate
Price of a currency measured in terms of another currency eg. £-$
Define fiscal policy
Use by the government of gov spending and taxation to try and achieve the governments policy objectives
Define expansionary fiscal policy
Using fiscal policy to increase AD - shift curve right
Define contractionary fiscal policy
Using fiscal policy to decrease AD - shifting it left
Define monetary policy
Use of the government and its agents (bank of England) of monetary instruments to try and achieve the govs policy objectives
Define contractionary monetary policy
Using monetary policy to decrease AD - shifting curves left
Define expansionary monetary policy
Using monetary policy to increase AD - shifting it left
Define rate of interest
Reward for lending savings to somebody else and the cost of borrowing
Define supply side policy
Aim to improve national economic performance by creations competitive / more efficient markets through interventionist policies
Define consumer price index
Official measure to calculate the rate of consumer price inflation in the UK
Compare direct/indirect tax
Indirect-tax that can be shifted by the person legally liable to the tax into someone else
Direct- can’t be shifted
Define distribution of income
Spread of income among individuals and different income groups in the economy
Define gross domestic product
Sum of all goods/services or level of output in an economy over a period of time
Define index number
Number used in an index to enable accurate comparisons
