Booklet 3 Flashcards
What is the name of inflation which economic agents are expecting and for which they have planned?
Anticipated Inflation
What is the term for when a change in one variable automatically leads to an opposing change in another?
Automatic Stabiliser
What is the name for a situation where the government’s spending for a given period equals its receipts?
Balanced Budget
What is the name for the interest rate set by the Bank of England which influences other interest rates across the UK economy?
Bank rate or Base rate
What is the term that describes a fall in the general-price level which is caused by falling costs and which acts as a boost to real incomes?
Benign deflation
What describes a situation where the government’s spending in a given period is greater that the government’s receipts, meaning the government will have to borrow?
Budget Deficit
What describes a situation where the government receives more in tax revenue than it spends?
Budget Surplus
What type of unemployment is cause by real wages being too high?
Classical or Real-Wage unemployment
What is the term describing a government policy designed to reduce aggregate demand (or the rate at which aggregate demand is increasing) usually to combat demand-pull inflation?
Contractionary Policy
What is the name for the rate of inflation excluding price changes from more volatile items such as food and fuel?
Core Inflation
What is the name for inflation caused by rising costs of production?
Cost-push Inflation
What is a macro-economic policy designed to work against the business cycle called?
Counter-cyclical policy
What is the name for a low but positive rate of inflation which means that prices are rising, but the increase is barely noticeable?
Creeping Inflation
What is it called when the currency outflows from a country’s current account exceed the currency inflows?
Current account deficit
What is it called when the currency inflows into a country’s current account exceed the currency inflows?
Current account surplus
What is unemployment caused by a lack of aggregate demand called?
Cyclical, Keynesian or demand-deficient unemployment
What term describes a sustained decrease in the general level of prices?
Deflation
What is inflation caused by an increase in aggregate demand called?
Demand-pull inflation
What is a tax on income such as wages/salaries or profit called?
Direct tax
What is a conscious decision by the government to change its fiscal policy called?
Discretionary fiscal policy
What is a fall in the rate of inflation called?
Disinflation
What is the name for people who are willing to work at the current wage rate- those in employment and those who are unemployed?
Economically Active
What is the name for people who are unwilling to work at the current wage rate or are unable to?
Economically Inactive
What is the term used to describe the value of one currency expressed in terms of another currency?
Exchange Rate
What is government policy designed to promote economic growth by increasing aggregate demand called?
Expansionary policy
What is the name for an unexpected event with origins outside of a country?
External Shock
What is the name of expansionary fiscal policy?
Fiscal Loosening
What is macroeconomic policy based on the control of taxation and government spending called?
Fiscal Policy
What is a contractionary fiscal policy called?
Fiscal Tightening
What is the name for interest rates which do not change for the duration of a loan?
Fixed interest rates
What are policies designed to increase the economy’s productive capacity by reducing government involvement called?
Free-market supply-side policies
What is the kind of unemployment where workers who are currently between jobs due to the time taken to find a suitable vacancy called?
Frictional Unemployment
What is it called when workers find it difficult to relocate?
Geographical immobility of labour
What is the name for a very high rate of inflation, typically in excess of 100% per year?
Hyperinflation
What is the name for a tax on expenditure, levied on goods and services?
Indirect Tax
What is the name for a sustained increase in the general level of prices?
Inflation
What is the reward for saving and the cost of borrowing?
Interest
What is the return on savings or borrowing expressed as a percentage?
Interest Rate
What is fairness between generations called?
Inter-generational equity
What is an unexpected event with origins within a country called?
Internal Shock
What are policies designed to increase the economy’s productive capacity through greater government intervention called?
Interventionist supply-side policies
What is an increase in an economy’s real gross domestic product caused by an increase in productive capacity called?
Long-run economic growth
What is a fall in the general price level caused by falling aggregate demand called?
Malign deflation
What is a macroeconomic policy based on the control of interest rates, the money supply and exchange rates called?
Monetary policy
What is the name for the stock of outstanding debt owed by a country’s government?
National debt
What is the difficulty workers have in changing jobs due to a lack of transferrable skills called?
Occupational immobility of labour
What is the name for macroeconomic policy designed to work in line with the business cycle?
Pro-cyclical policy
What is the name for a tax that will take a higher proportion of high earner’s income?
Progressive tax
What is the name for a tax that will take an equal proportion of everybody’s income?
Proportionate tax
What is the name for real national output/income per person?
Real G.D.P per capita
What is the name for a tax that will take a higher proportion of low earners’ income?
Regressive tax
What is it called when workers are unemployed only at certain times of the year?
Seasonal unemployment
What is an increase in an economy’s real gross domestic product caused by increased use of its productive capacity called?
Short-run economic growth
What is unemployment cause by a change in the structure of the economy which means that there is no longer demand for a certain type of labour called?
Structural Unemployment
What are policies designed to increase long run aggregate supply and increase the productive capacity called?
Supply-side policies
What unemployment is often regarded as part of structural unemployment, caused by workers being replaced by machinery?
Technological unemployment
What is it called when the value of a country’s imports exceeds the value of the country’s exports?
Trade deficit
What is inflation which economic agents are not expecting and for which they have not planned called?
Unanticipated inflation
What is it called when a worker has a job but is working fewer hours than they would like - e.g. someone who wants a full time job but takes a part-time job?
Underemployment
What is the number of people who are actively seeking employment at a prevailing wage rate but are unable to find it called?
Unemployment
What are interest rates that change, usually in response to changes in Bank Rate, such as some mortgages and most savings accounts, called?
Variable interest rates
What is a scenario when rising inflation leads workers to demand increased pay to maintain their standard of living, which in turn increases firms’ costs leading to further price rises and more inflation called?
Wage-price spiral
What are the two measures of unemployment used in the UK?
Claimant Count
LFS - Labour Force Survey
Give four sources of demand-pull inflation.
Increasing income/consumer confidence
Falling interest rates
Increased government spending
Increased Exports
Give four sources of cost-push inflation.
Rising Wages
Increasing Indirect taxes
Rising energy/fuel costs
Rising raw material prices
Give three possible benefits to inflation.
Allowing some inflation means that relative prices can adjust
Difficulties in measuring inflation may mean that targeting zero could mean deflation is actually happening
Inflation may mean that firms can overcome the problem of prices (especially wages) being sticky-downwards.
