Chapter 8 - Economic performance Flashcards
ECONOMIC PERFORMANCE
success or failure in achieving policy objectives
ECONOMIC RECOVERY
when SR economic growth happens after a recession
DEMAND-SIDE
impact of changes in aggregate demand on the economy
SUPPLY-SIDE
changes in potential output affected by the available factors of production e.g. productivity
TREND GROWTH RATE
rate at which output can grow without inflationary pressures
SEASONAL FLUCTUATION
variation in economic activity due to a change in season
ECONOMIC CYCLE
ups and downs in economic activity over a period of 4-12 years
ACTUAL OUTPUT
level of real output in the economy in a particular year
TREND OUTPUT
what the economy is capable of producing when working at full capacity
POSITIVE OUTPUT GAP
the level of actual real output is GREATER than the trend output
NEGATIVE OUTPUT GAP
the level of actual real output is LOWER than the trend output
FRICTIONAL UNEMPLOYMENT (transitional unemployment)
short term unemployment due to workers that are in-between jobs
GEOGRAPHICAL IMMOBILITY OF LABOUR
workers are unwilling or unable to move location in search of work
OCCUPATIONAL IMMOBILITY OF LABOUR
workers are unwilling or unable to move jobs due to their skills
STRUCTUAL UNEMPLOYMENT
long term unemployment due to declining industries or growing and replacing labour with technology
CYCLICAL UNEMPLOYMENT
unemployment due to a lack of AD because of recession or depression
SEASONAL UNEMPLOYMENT
unemployment arising due to different seasons
REAL WAGE
purchasing power of the nominal wage
REAL-WAGE UNEMPLOYMENT
unemployment due to real wages being stuck above the equilibrium real wage
VOLUNTARY UNEMPLOYMENT
when workers don’t work as they’re looking for a higher paid job
INVOLUNTARY UNEMPLOYMENT
when their are no jobs available
EQUILIBRIUM UNEMPLOYMENT
when the economy’s aggregate labour market is in equilibrium
NATURAL RATE OF UNEMPLOYMENT (NRU)
rate of unemployment when the labour market is in equilibrium
DEMAND-PULL INFLATION
rising price level caused by a shift in demand
COST-PUSH INFLATION
rising price level due to an increase in costs, shown by a shift in the SRAS curve
WAGE-COST INFLATION
rising price level caused by an increase in wages and salaries (movement in SRAS curve)
IMPORT-COST INFLATION
rising price level due to an increase in import spending (movement in SRAS curve)
EMERGING-MARKET COUNTRY
country thats progressing to becoming more economically advanced by rapid growth and industrialisation
DISINFLATION
when the rate of inflation is falling
MONETARISTS
economists who argue that a prior increase in the money supply is the cause of inflation
QUANTITY THEORY OF MONEY
inflation is caused by an increase in the money supply
EQUATION OF EXCHANGE
stock of money x velocity of circulation=price level x quantity of real output
CURRENT ACCOUNT DEFICIT
exports less than imports
CURRENT ACCOUNT SURPLUS
exports greater than imports
BALANCE OF TRADE IN GOODS
part of the current account measuring difference in payments for exports and imports of goods
BALANCE OF TRADE IN SERVICES
part of the current account measuring difference in payments for exports and imports of services
NET INVESTMENT INCOME
difference between inward and outward flows in investment income
TRANSFERS
payments flowing between countries in forms of aid, grants, private transfers and gifts
EXPORT-LED GROWTH
economic growth due to an increase in exports in the short run, and increased national competitiveness of exporting industries in the long run
REINDUSTIRIALISE
growth of industries which will replace industries which have disappeared or shrunk
PHILLIPS CURVE
shows relationship between rate of inflation and rate of unemployment
LR PHILLIPS CURVE
vertical line showing the NRU
