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economics chapter 1 macro > definitions > Flashcards

definitions Flashcards

1
Q

the multiplier

A

the process by which any change in a component of aggregate demand results in a greater final change in real GDP

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2
Q

MPS (marginal propensity to save)

A

the proportion of additional income that is saved by households

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3
Q

MPC (marginal propensity to consume)

A

the proportion of disposable income that households devote to consumer spending (expenditure)

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4
Q

APC (Average propensity to consume)

A

the proportion of disposable income spent in a economy. CONSUMER EXPENDITURE / DISPOSABLE INCOME

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5
Q

APS ( average propensity to save )

A

the proportion of disposable income saved in an economy. SAVINGS / DISPOSABLE INCOME

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6
Q

accelerator effect

A

a rise in national income can lead to a proportionally greater final rise of investment

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7
Q

aggregate demand

A

The total demand for a countries, goods and services at a given price level, and in a given time period

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8
Q

aggregate supply

A

The total amount that produces in an economy are willing and able to supply at a given price level in a given time period

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9
Q

balance of payments

A

 A record of the money flows into an out of a country in a year

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10
Q

claimant count

A

A monthly count of people claiming unemployment benefits. JSA in the UK

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11
Q

Consumer price index

A

A measure of the changes in the price of a representative basket of consumer goods and services differs from RPI methodology and coverage

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12
Q

Current account

A

Trade in goods, trade in services, income flows, and transfers on the balance of payments

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13
Q

deflation

A

A situation in which the average level of prices falling (negative inflation)

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14
Q

Circular flow of income

A

A model of the movements of spending and income throughout the economy which shows the impact of injections and withdrawals on real GDP

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15
Q

disposable income

A

Total personal income minus total personal taxes

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16
Q

Economic growth

A

In the short run, an increase in real GDP. In the long run and increase in productive capacity.

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17
Q

economic stability

A

Avoiding volatility in economic growth rates, inflation, employment, and exchange rates

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18
Q

Exchange rate

A

The value of one currency in terms of another currency

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19
Q

Expenditure method

A

Add up all the spending on goods and services in a year

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20
Q

exports

A

The value of goods and services sold abroad

21
Q

Full employment ( keynesian)

A

Full employment is achieved when there is no cyclical unemployment

22
Q

Full employment ( monetarist )

A

Full employment is the level of involuntary unemployment that the central bank judges to be acceptable or necessary to keep inflation low

23
Q

GDP

A

The value of output produced in a country in a year

24
Q

Government spending

A

Current expenditure by the central government and local government on goods and services

25
Q

Imports

A

The value of goods and services bought from abroad

26
Q

income method

A

add up all the factor incomes earned in a country in a year

27
Q

income redistribution

A

The transfer of income from the rich to poor to ensure greater access to the necessities

28
Q

inflation

A

Sustained rise in the general price level

29
Q

injections

A

Additions of extra spending into the circular flow of income in the form of government spending investment and exports

30
Q

investment

A

Business and government spending on capital goods

31
Q

keynesian school

A

A group of economists believe that the macroeconomy can settle at an equilibrium that is below full employment

32
Q

Leakages

A

Withdrawals of possible spending from the circular flow of income in the form of savings, taxation and imports

33
Q

macroeconomic equilibrium

A

A situation where aggregate demand equals aggregate supply and real GDP is not changing

34
Q

Marginal propensity to import

A

The proportion of an increase in disposable income household spend on imported goods and services

35
Q

Marginal propensity to tax

A

The proportion of an increase in disposable income that households pay As tax

36
Q

monetarist school

A

A group of economists, believe that the macroeconomy always adjusts rapidly to a full employment level of output

37
Q

net exports

A

The value of exports minus the value of imports

38
Q

Output method

A

Add up the total value, added or final value of goods and services produced in a year

39
Q

Price level

A

The average prices of all the product produced in an economy

40
Q

Real GDP

A

The country output measured in constant prices and so adjusted for inflation

41
Q

Shock

A

A shock is an unexpected or unpredictable event that affects economy, either positively or negatively

42
Q

Unemployment

A

People without a job who have been actively seeking work in the past four weeks and available to start working in the next two weeks

43
Q

equation for multiplier

A

K = 1/MPW
MPW = MPS + MPT + MPM

44
Q

4 main macroeconomic objectives

A
  • low inflation
  • low unemployment
  • stable balance of payments
  • economic growth
45
Q

Development

A

A process that leads to an improvement in peoples economic well-being, and an increase in quality of life

46
Q

Disinflation

A

A decrease in the rate of inflation

47
Q

Economic development

A

A process that leads to improvement in peoples economic well-being, and increasing quality life

48
Q

economically inactive

A

People without a job who have not actively sought work in the last four weeks, and are not available to start work in the next two weeks

economics chapter 1 macro (4 decks)

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