Deck 4 (M-Q) Flashcards
Marginal propensity to consume
The proportion of additional income devoted to consumer expenditure
Marginal propensity to import
The proportion of additional income that is spent on imports of goods and services
Marginal propensity to save
The proportion of additional income that is saved by households
Marginal propensity to tax
The proportion of additional income that is taxed
Marginal propensity to withdraw
The proportion of additional income that is withdrawn from the circular flow of income (the sum of the marginal propensities to save, import and tax)
Monetarist School
Economists who think that the macroeconomy always adjusts rapidly to the full employment level of output
Monetary policy
The decisions made by government regarding monetary variables such as the money supply and the interest rate
Monetary Policy Committee
A body within the Bank of England responsible for the conduct of monetary policy
Money stock
The quantity of money in the economy
Multinational corporation (MNC)
A company whose production activities are carried out in more than one country
Multiplier
A ratio of change in equilibrium real income to the autonomous change that brought it about, defined as 1 divided by the marginal propensity to withdraw
Natural rate of output
The long-run equilibrium level of output to which monetarists believe the macroeconomy will always tend; corresponds to full employment
Net investment
Gross investment minus depreciation
Nominal value
Value of an economic variable based on current prices, taking no account of changing prices through time
Productivity
Measure of the efficiency of a factor of production
Purchasing power parity theory of exchange rates
In the long-run floating exchange rates are determined by relative inflation rates in different countries
Quantitative easing
A process by which the central bank purchases assets, such as government and corporate bonds, in order to release additional money into the financial system
Mixed economy
An economic system in which resources are allocated through a mixture of the market and direct public sector involvement
Net exports
The value of exports minus the value of imports
Nominal GDP
Output of a country measured in current prices and so not adjusted for inflation
Occupational immobility of labour
The difficulty in moving from one job to another
Output gap
The difference between and economy’s actual and potential real GDP
Overheating
When the growth in aggregate demand outstrips the growth in aggregate supply resulting in demand-pull inflation
Price level
The average of the prices of all the goods and services produced in an economy
Privatistation
Transfer of assets from the public sector to the private sector
Progressive tax
A tax that takes a higher percentage from the income of the rich
Protectionism
The protection of domestic industries from foreign competition
Quota
A limit on the number of imports
