Chapter 7 - External Economic Influences On Business Activity Flashcards
Market Failure
When markets fail to achieve the most efficient allocation of resources, resulting in under or overproduction of certain goods or services.
External Costs
The costs of an economic activity that are not paid for by the producer or consumer, but by the rest of society.
Macroeconomic Objectives
The goals of a government is aiming to achieve for the whole economy.
Economic Growth
An increase in a country’s productive potential, measured by an increase in its real GDP.
Real GDP
Gross domestic product data adjusted for the effects of inflation.
Inflation
An increase in the average price level of goods and services resulting in a fall in the value of money.
.Unemployment
When members of the working population are willing and able to work but are unable to find a job.
Imports
Goods and services purchased from other countries.
Exports
Goods and services sold to consumers and businesses in other countries.
Exchange Rate
The price of one currency in terms of another.
Recession
A decline in real GDP of 2 or more quarters ( at least six months).
Business Investment
Expenditure by businesses on capital equipment, new technology and research and development.
Labor Productivity
Average Output per employee in a given time period.
Business Cycle
The regular swings in output, measured by real GDP, that occur in most economies, varying from boom conditions to recession.
Stages Of Business Cycle
1) Boom
2) Recession
3) Slump
4) Recovery and Growth
Deflation
A fall in the average price level of goods and services.
Hyperinflation
Very high and accelerating inflation, which quickly erodes the real value of the local currency.
Working Population
All those in the population of working age who are willing and able to work.
Cyclical Unemployment
Unemployment caused by low demand for goods and services during a period of slow economic growth or a recession.
Structural Unemployment
Unemployment caused by the decline in important industries, leading to significant job losses in one sector of industry.
Frictional Unemployment
Unemployment caused by the workers losing or leaving job and taking a substantial period of time to find alternative employment.
Monetary Policy
Decisions about the level of interest rates and the supply of money in the economy.
Fiscal Policy
Decisions about government expenditure, tax rates and government borrowing.
Budget Deficit
The value of government spending exceeds revenue form taxation.
