big Flashcards
business cycle
periodic fluctuations in economic activity, measured by changes in real GDP growth rate
gross domestic product
market value of aggregate output produced within a country during a given time period
gross national income
value of all final g&s produced by FoP of the country’s residents, regardless of location
real
GDP measured in terms of prices of a base year and has eliminated the influence of changes in price
nominal
GDP measured in terms of current prices and does not account for changes in price
per capita
correspond to each person in the population on average
living standard
degree of wealth, material comfort & necessities available to a person
welfare
the physical and mental happiness of a person
refers to a range of gov programmes that provide financial or other aid to individuals or groups who cannot support themselves
aggregate demand
total quantity of real GDP that all buyers in an economy are willing & able to buy at different general P levels over a particular time period, ceteris paribus
consumer confidence
how optimistic consumers are about their future income and the future of the econ
business confidence
how optimistic firms are on their future sales and econ activities
aggregate supply
total quantity of real GDP produced in an economy at different general price levels over a time period, ceteris paribus
short run aggregate supply
relationship between gen P levels and Q of real outputs produced by firms when resource P no change
long run aggregate supply
relationship between gen P levels and Q of real outputs produced by firms when resource P is flexible & changes along with changes in gen P levels
full employment output
level of output measured by real GDP when all productive resources are fully and efficiently used
unemployment is at NRU
inflation
sustained increase in general price level
inflationary gap
real GDP»_space;> Yp
excess AD → unemployment «< NRU
firms require more labour → excess demand of labour → over-utilised
deflation
sustained decrease in general price level
deflationary gap
real GDP «< Yp
insufficient AD → unemployment»_space;> NRU
firms require less labour → excess supply of labour → under-utilised
unemployment
people of working age who are willing and able to work and are actively seeking work but are without work at the current wage rate
frictional unemployment
occurs when workers are moving in between jobs
seasonal unemployment
occurs when workers are unemployed due to seasonal fall in labour demand in the industry
structural unemployment
mismatch between the worker’s skills supplied & jobs available
cyclical unemployment
occurs when the economy produces at an output level that is lower than Yp at deflationary rate
natural rate of unemployment
frictional unemployment + structural unemployment + seasonal unemployment
consumer price index
measure of cost of g&s purchased by the typical household in an economy
weighted price index
an approach to calculating the change in the price level by giving a weight to each item according to its importance in the consumers’ budgets
disinflation
a fall in the rate of inflation
demand-pull inflation
sustained increase in general price level caused by an increase in AD
cost-push inflation
sustained increase in general price level caused by an increase in CoP resulting in a decrease in SRAS
bad deflation
deflation caused by decrease in AD
good deflation
deflation caused by increasing in SRAS
economic growth
increase in real GDP of an economy over a time period
actual economic growth
previous unemployed/underemployed FoP are brought into production
potential economic growth
increase in quantity & quality of FoP that increases the maximum production capacity
productivity
the efficiency with which a country combines capital and labour to produce more with the same level of factor inputs
interest rate
rate at which borrowers are charged or lenders paid for their loan
monetary policy
carried out by the central bank by changing the interest rate to adjust AD to maintain low unemployment and price stability
fiscal policy
manipulations by the gov of its own tax & expenditure to adjust AD to maintain low unemployment and price stability
expansionary
increase in AD and real GDP
contractionary
decrease in AD and real GDP
supply-side policy
aim at positively affecting production side of econ by improving institutional framework and capacity to produce
market-based supply side policy
make institutional changes such that the market operates more freely and is more competitive with less government intervention
privatisation
a type of supply-side policy where the government sells public assets to the private sector
deregulation
a type of supply-side policy where the government reduces the number or type of regulations governing the behaviour of firms
labour market reforms
make the markets more responsive to supply and demand so that the level of employment will increase and productivity will rise
labour union
an organisation of workers whose goals include the improvement of working conditions and payments to workers
work on behalf of workers through negotiations (collective bargaining) with management
interventionist supply side policy
government take an active role in increasing productive capacity
