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econ > Definitions > Flashcards

Definitions Flashcards

1
Q

Long-run economic growth

A

The expansion of the productive capacity of the economy

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2
Q

Short run economic growth

A

an increase in real GDP

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3
Q

nominal value

A

Value of an economic variable at current prices, without taking account of changing prices through time

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4
Q

real value

A

value of an economic variable, taking account of changing prices throughout time

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5
Q

real GDP

A

GDP at constant prices, taking account of prices through time

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6
Q

nominal GDP

A

GDP at current prices without taking into account of changing prices over time

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7
Q

GNI

A

Gross national income = GDP + net income from abroad

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8
Q

Seasonal adjustment

A

A process whereby seasonal fluctuations in a variable are smoothed to reveal a trend

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9
Q

GDP per capita

A

The average level of GDP per person

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10
Q

productivity

A

measure of the efficiency of a factor of production

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11
Q

Labour productivity

A

Measure of output per hour worked

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12
Q

capital productivity

A

Measure of the output of capital

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13
Q

total factor productivity

A

The average productivity of all factors. Measured as total output over total input

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14
Q

human capital

A

the stock of skills and expertise that contribute to a workers productivity

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15
Q

economic cycle

A

a phenomenon whereby GDP fluctuates around its underlying trend

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16
Q

Recession

A

A situation where an economys real GDP falls in 2 consecutive quarters

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17
Q

Inflation

A

The rate of change in the average price level

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18
Q

Index number

A

A way of comparing the value of a variable with a base observation

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19
Q

CPI

A

Consumer price index - measure of the general level of prices in the uk

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20
Q

CPIH

A

CPI but taking into account housing costs

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21
Q

deflation

A

A fall in the average level of prices

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22
Q

disinflation

A

a fall in the rate of inflation

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23
Q

Cost push inflation

A

Inflation caused by an increase in the costs faced by firms arising from the supply side of the economy

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24
Q

Demand pull inflation

A

Inflation caused by an increase in AD

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25
Q

Money stock

A

The amount of money in the economy

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26
Q

In employment

A

People who are working for either: Firms/organizations or self-employed

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27
Q

Economically inactive

A

People of working age who are not looking to work

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28
Q

Discouraged workers

A

people who have stopped looking for employment due to the fact that they are unable to find it

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29
Q

Workforce

A

people who are economically active

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30
Q

unemployed

A

people who are economically active but are not employed

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31
Q

full employment

A

a situation where all people who are economically active are all willing and able to find work

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32
Q

Claimant count of unemployment

A

The number of people claiming JSA each month

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33
Q

JSA

A

Jobseekers allowance – a benefit for people who are looking for work and are not in full-time employment

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34
Q

ILO unemployment rate

A

measure of the percentage of people who are without jobs but are available and willing to work

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35
Q

Frictional unemployment

A

Unemployment that is associated with job search - people who are between jobs

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36
Q

Structural unemployment

A

Unemployment that arises because of changes in economic activity with the economy

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37
Q

Cyclical unemployment

A

Unemployment that arises during the downturn of the economic cycle e.g. recession

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38
Q

Demand-deficient unemployment

A

Unemployment that arises due to a lack of AD within an economy

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39
Q

seasonal unemployment

A

Unemployment that arises

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40
Q

Real wage inflexibility

A

An argument that is real wages do not decrease, the result is unemployment

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41
Q

Voluntary unemployment

A

A situation arising when an individual chooses not to work

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42
Q

Involuntary unemployment

A

A situation arising when an individual is unable to find employment

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43
Q

Balance of payments

A

a set of accounts showing the transactions conducted between
residents of a country and the rest of the world

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44
Q

Current account of the balance of payments

A

account identifying transactions in goods and services between the residents of a county and the rest of the worlds

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45
Q

Financial account of the balance of payments

A

account identifying transactions in financial assets between the residents of a country and the rest of the world

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46
Q

Capital account of the balance of payments

A

Account identifying transactions in physical capital between the residents of a country and the rest of the world

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47
Q

credit

A

money flowing into the country from a transaction

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48
Q

debit

A

money flowing out of the country from a transaction

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49
Q

monetary policy

A

Decisions made by government regarding monetary variables

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50
Q

money supply

A

the quantity of money that is in circulation in the economy

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51
Q

central bank

A

the banker to the government

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52
Q

Bank of England

A

UKs central bank

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53
Q

Transmission mechanism of monetary policy

A

the channel by which monetary policy affects AD

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54
Q

inflation targeting

A

an approach to monetary policy in which the central bank is given independence to set interest rates

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55
Q

Monetary policy committee

A

The part of the BOE responsible for monetary policy

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56
Q

bank rate

A

the interest rate the is set by the Monetary policy committee to influence inflation

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57
Q

Liquidity trap

A

a situation whereby interest rate cannot fall any lower, so monetary policy cannot affect AD

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58
Q

Quantitative easing`

A

A process by which liquidity in the economy is increased when the central bank purchases assets

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59
Q

Scarcity

A

A situation that arises due to unlimited wants but limited resources
Or when demand is greater than supply

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60
Q

Economic goods

A

Goods that are scarce

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61
Q

Free goods

A

Goods that are not scarce

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62
Q

poverty

A

A situation in which individuals lack the basic necessities of life

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63
Q

The basic economic problem

A

Scarcity - unlimited want limited resources

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64
Q

firms

A

businesses – an organization that produces output

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65
Q

households

A

a person or group of people who engage in economic activity as a single entity

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66
Q

government

A

the group of MPs responsible for implementing policy and laws

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67
Q

rationality

A

economic agents acting in their own best instrests

68
Q

utility

A

the benefit derived from consumption

69
Q

incentive

A

a motivating factor

70
Q

positive statement

A

a factual statement

71
Q

normative statement

A

a statement with a value judgement

72
Q

Value judgement

A

a statement based on opinion

73
Q

factor of production

A

resources used in the production process

74
Q

trade-off

A

a situation in which one choice requires the sacrifice of the alternative

75
Q

Opportunity cost

A

the value of the next best alternative

76
Q

PPC

A

Production possibility curve - a curve showing the maximum combinations of goods or services that can be produced in a given time

77
Q

capital goods

A

goods used as a part of the production process

78
Q

consumer goods

A

goods produced for consumption

79
Q

Resource allocation

A

the way in which a societies resources are deployed across their alternate uses

80
Q

market economy

A

market forces are allowed to guide the allocation of resources within a society

81
Q

centrally planned economy

A

the government guides resource allocation

82
Q

mixed economy

A

a combination of market forces and government guides the allocation of resources in an society

83
Q

capitalism

A

a system of production in which there is private ownership of productive resources

84
Q

invisible hand

A

Term used by Adam smith to describe the way in which resources are allocated in a market economy

85
Q

GDP

A

the value of all goods and services produced in a country per year

86
Q

specialisation

A

the process of concentrating on a task or activity in order to become an expert in it

87
Q

division of labour

A

a process whereby production is broken down into a sequence of stages and workers are assigned to each stage

88
Q

market

A

A set of arrangements that allow transaction to take place

89
Q

barter system

A

an economy without money

90
Q

money as a medium of exchange

A

the function of money that enables transactions to take place

91
Q

labour productivity

A

output per worker per unit of input

92
Q

Marginal principle

A

the idea that economic agents make decisions based on changes from the existing

93
Q

rational decision making

A

a decision that allows an economic agent to maximise their objective

94
Q

marginal utility

A

the additional utility gained from consuming an extra unit of a good or service

95
Q

law of diminishing marginal utility

A

states that the more units are consumed, the lower the marginal utility from consumption

96
Q

tax

A

Theft – compulsory fees levied on individuals by firms or government

97
Q

indirect tax

A

a tax levied on expenditure

98
Q

direct tax

A

a tax levied on income

99
Q

incidence of tax

A

the way in which the burden of tax is split between buyers and sellers

100
Q

ad valorem tax

A

a tax levied on a commodity as a percentage of its selling price

101
Q

specific tax

A

a tax of a fixed amount imposed on purchases of a commodity

102
Q

excess burden of sales tax

A

the loss to society following a sales tax

103
Q

polluter pays principle

A

an argument that a firm causing pollution should be charged for the externalities it causes

104
Q

Government expenditure

A

AKA state provision – where the government decides which goods or services to produce and then spends money providing them

105
Q

Price control

A

A legal maximum or minimum price

106
Q

Price floor

A

A legal minimum price

107
Q

Price ceiling

A

A legal maximimum price

108
Q

Merger

A

2 or more firms joining to form a new firm

109
Q

cartel

A

an agreement between firms on price and output with the intent of maximising profits

110
Q

buffer stock

A

a scheme intended to stabilise the price of a commodity by buying excess supply when supply is high and selling when price is low

111
Q

legislation

A

laws created by government to enforce regulations

112
Q

regulation

A

rules created by government to control the activities of producers and consumers

113
Q

prohibition

A

an attempt to prevent the consumption of a demerit good de declaring it illegal

114
Q

imformation provision

A

when the government educates the public to help consumers make better choices

115
Q

pollution permit system

A

a system for controlling pollution based on a market for permits that allows firms to pollute

116
Q

property rights

A

legal control or ownership of a good

117
Q

contracting

A

a situation in which the public sector places activities in the hands of a private firm and pays for provision

118
Q

competitive tendering

A

a process by which the public sector calls for private firms to bid for contracts

119
Q

public-private partnership

A

an arrangement by which a government service or private business venture is funded and operated through a partnership of government and private sector

120
Q

Private finance initiative

A

a funding arrangement under which the private sector designs builds and operates an asset for the public sector in return for an annual payment from government

121
Q

government faliure

A

a misallocation of resources arising from government intervention that causes a less efficient allocation of resources

122
Q

ceteris paribus

A

the assumption that all else remains equal

123
Q

Equilibrium

A

The point at which supply and demand are equal

124
Q

Elasticity

A

The responsiveness of one factor to a change in price

125
Q

PeD

A

Price elasticity of demand – How much demand will change given a change in price

126
Q

PeS

A

Price elasticity of supply – How much supply will change given a change in price

127
Q

XeD

A

Cross elasticity of demand – How much of one good/service will change given the change in price of another good/service

128
Q

YeD

A

Income elasticity of demand – How much demand will change given a change in price

129
Q

Relatively elastic

A

Elasticity greater than 1

130
Q

Inelastic

A

Elasticity less than 1

131
Q

Consumer surplus

A

the extra amount a consumer is willing to pay for a product above the price they actually do pay

132
Q

Producer surplus

A

The different between what producers are willing and able to supply the good for and the price they actually charge

133
Q

Inferior good

A

A negative YeD - as RDI increases sales fall

134
Q

RDI

A

Real Disposable Income

135
Q

Externality

A

An effect on a 3rd party

136
Q

Negative externality of production

A

when the process of producing a good or service creates negative consequences to a 3rd party i.e. pollution from factories

137
Q

Negative externality of consumption

A

when the process of consuming a good or service has a negative effect on a 3rd party i.e. smoking

138
Q

Positive externality of production

A

when the process of producing a good or service positively affects a 3rd party i.e. more money into a community caused by workers spending more

139
Q

Positive externality of consumption

A

when the process of consuming a good or service has a positive effect on a 3rd party i.e. lower pollution caused by people riding a bike instead of driving

140
Q

MBP

A

Marginal private benefit – the benefit to a consumer from consumption of a good or service

141
Q

MPC

A

Marginal private cost - the cost to the business to supply a good/service

142
Q

MSB/MSC

A

Marginal social benefit/cost

143
Q

Asymmetric information failure

A

When one party has access to information that the other doesn’t e.g. a car salesman selling a dodgy car

144
Q

Market failure

A

A situation in which the allocation of resources by the market inefficient

145
Q

Moral hazard

A

A situation in which one party engages in risky behaviour or acts in bad faith because they know that another bears the economic consequences e.g. 2008 financial crisis

146
Q

Merit goods

A

Merit goods are goods that will be under-consumed because people dont fully appreciate thier benefit

147
Q

Demerit goods

A

Goods that are over-consumed because people dont fully understand the dangers that comes with them

148
Q

Private goods

A

A good that can only be consumed by a single person, therefore there is a profit incentive to provide these goods

149
Q

Public goods

A

commodities or services that are provided without profit to all members of a society

150
Q

Non-rivalrous

A

The consumption of a good by one person does not reduce the amount for another person

151
Q

Non-excludable

A

If it is consumed by one person it is impossible to prevent others from consuming it

152
Q

Marginal cost of production

A

The cost of producing an extra unit of a good/service

153
Q

Non-rejectable

A

Once it has been produced it the people benefiting from it cannot avoid consuming it e.g. if you like in the UK you must rely on the UK military to protect you

154
Q

Free-rider

A

Someone who consumer who benefits from a goods or service without paying for it

155
Q

Quasi-public good

A

A good that shows some traits of a public good but not others

156
Q

Fine tuning (in respects to fiscal policy)

A

the process of maintaining a steady rate of economic growth over a sustained period of time by using monetary policy

157
Q

AD

A

Aggregate demand the total value of every good and service demanded in the economy

158
Q

The circular flow of income

A

The idea that all money circulates around the economy

159
Q

National income

A

The value of all the goods produced in the economy in a given time

160
Q

consumer confidence

A

the level of optimism that consumers have about the state of the economy

161
Q

MPC

A

Marginal propensity to consume - the percentage of a change in income that consumers spend

162
Q

Multiplier effect

A

When an initial change in AD has a larger effect on the level of national income

163
Q

Accelerator theory

A

An increase in real GDP will lead to a proportionally higher increase in private sector investment

164
Q

Austerity

A

A set of government policies designed to reduce the budget deficit

165
Q

Fiscal policy

A

When the government directly uses Spending and Taxation to achieve their macroeconomic objectives

166
Q

Balanced budget

A

Where Government spending = Taxation

167
Q

Budget surplus

A

G < T

econ (3 decks)

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