Definitions Flashcards
What is aggregate supply
What is aggregate demand
Everything created in an economy
Everything bought in an economy
What does price level represent
Inflation
What is a recession
A recession means a fall in the level of real national output (GDP), technically defined as two consecutive quarters of negative GDP growth. In a recession national output declines leading to a contraction in employment, incomes and profits.
What did Keynes believe
that more money should be put into the economy to fix its problems.
What did Hayek believe
the economy is ultimately dominated by people being ‘animals’ so believes people control the market.
Name the aggregate demand equation
AD = C + I + G + (X - M)
AD → Aggregate demand
C → Consumption
I → Investment
G → Govt. Spending
X → Exports
M → Imports
How is economic growth measured
as a percentage change in the Gross Domestic Product (GDP) or Gross National Income (GNI)
What is GDP
GDP refers to the market value of all final goods and services produced in a country in a country in a given period.
What is GNI
GNI measures the total value of national output inclusive of output produced abroad.
What is GDP per capita
GDP per capita is often considered an indicator of a country’s standard of living.
What is Economic growth
Economic growth is defined as the increase in the real value of goods and services produced as measured by the annual percentage change in real Gross Domestic Product (GDP).
What is the economic cycle
An economic cycle is the overall state of the economy as it goes through four stages in a cyclical pattern. The four stages of the cycle are expansion, peak, contraction, and trough. Factors such as GDP, interest rates, total employment, and consumer spending, can help determine the current stage of the economic cycle.
What is the Trend rate of growth
The trend rate of growth is the long run average rate for a country over a period of time. Measuring the trend requires a long-run series of data to identify the different stages of the economic cycle and then calculate average growth rates from peak to peak or trough to trough.
What are output gaps
the amount by which the actual output of an economy falls short of its potential output.
What is unemployment
the number or proportion of unemployed people.
What is inflation
Inflation is the ongoing increase in the average level of prices across the economy over a period of time
What are balance of payments
The balance of payments records a country’s financial transactions with the rest of the world. It comprises the current account which records trade in goods and services, together with income flows and the capital and financial account which records short and long term capital movements.
What is GNP
Gross National Product (GNP) is a measure of the value of all goods and services produced by a country’s residents and businesses. It estimates the value of the final products and services manufactured by a country’s residents, regardless of the production location.
What are real and nominal terms
In economics, the nominal values of something are its money values in different years. Real values adjust for differences in the price level in those years. Examples include a bundle of commodities, such as Gross Domestic Product, and income.
What happens when there is a negative output gap
When there is a negative output gap the country is not working its maximum potential.
What happens when there is a positive output gap
When there is a positive output gap the country is working to its full potential, with productivity increasing.
What is The Short-Run Aggregate Supply Curve (SRAS)
The SRAS curve shows that as the price level increases and you move along the SRAS, the amount of real GDP that will be produced in an economy increases. An increase in the SRAS is shown as a shift to the right.
What is The Long-Run Aggregate Supply Curve (LRAS)
a curve that shows the relationship between price level and real GDP that would be supplied if all prices, including nominal wages, were fully flexible; price can change along the LRAS, but output cannot because that output reflects the full employment output.
What is The Long-Run Aggregate Supply Curve (LRAS)
a curve that shows the relationship between price level and real GDP that would be supplied if all prices, including nominal wages, were fully flexible; price can change along the LRAS, but output cannot because that output reflects the full employment output.
