Definitions

Question 1

national debt

Answer 1

total stock of gov debt over time

Question 2

bop

Answer 2

measures inflows and outflows of money into and out of a country

Question 3

accelerator effect

Answer 3

changes in investment can be directly linked to changes in the rate of gdp growth

Question 4

economic integration / trading bloc

Answer 4

process whereby countries coordinate to reduce trade barriers and increase trade between themselves

Question 5

bilateral/multilateral trade agreement

Answer 5

agreement to reduce trade barriers between 2/multiple countries

Question 6

bilateral aid

Answer 6

when aid is given from one gov to another gov directly

Question 7

investment

Answer 7

when firms spend money (on capital goods) to increase their efficiency/productive capacity

Question 8

economic growth

Answer 8

an increase in real gdp in an economy in a year caused by an increase in ad or lras

Question 9

pta

Answer 9

countries join together to reduce tariffs/quotas but only on certain g/s
eg eu and african Caribbean countries

Question 10

full economic integration

Answer 10

countries completely harmonize all policy (fiscal+monetary) + political power under one governing body
eg uk

Question 11

fta

Answer 11

countries join together and eliminate all trade barriers between each other, but they are free to trade w any other country outside the fta
eg NAFTA

Question 12

customs union

Answer 12

countries join together and eliminate all trade barriers between each other, and impose a common external barrier (eg tariff) on countries outside the union
eg eu

fta but w/o freedom of trade w countries outside union

Question 13

common/single market / economic union

Answer 13

countries join together and eliminate all trade barriers between each other along w complete free movement of fops, and impose a common external barrier (eg tariff) on countries outside the union

customs union but w complete free movement of fops

Question 14

monetary union

Answer 14

economic union/common/single market

countries join together and eliminate all trade barriers between each other along w complete free movement of fops, and impose a common external barrier (eg tariff) on countries outside the union.

also adopt same currency, central bank and therefore same monetary policy

Question 15

diversification

Answer 15

moving away from primary product dependence and into manufacturing

Question 16

systemic risk

Answer 16

risk that collapse of one financial institution could lead to entire financial system collapse

Question 17

Negative output gap

Answer 17

where actual output is less than potential output

Question 18

+ output gap

Answer 18

where actual output is greater than potential output

Question 19

near money

Answer 19

non cash assets which can be quickly converted into cash
eg bonds

Question 20

liabilities

Answer 20

anything that is not owned and owed to someone else

Question 21

automatic stabilisers

Answer 21

fiscal policy tools to influence gdp and counter fluctuations in the economic cycle

Question 22

protectionsism

Answer 22

any barrier that restricts free trade taking place between nations

Question 23

wto

Answer 23

int org that regulates world trade

Question 24

international competitiveneess

Answer 24

the ability of a nation to compete successfully overseas and sustain improvements in living standards + output

Question 25

bond

Answer 25

a piece of paper that guarantees the owner of the bond yearly couponn payments and the face value of the bond back when it matures

Question 26

occupational immobility

Answer 26

skills mismatch between skills that workers have and job vacancies that exist

Question 27

seasonal u

Answer 27

temporary fall in d for workers
eg ice cream, tourism, skiing

Question 28

market making

Answer 28

place where financial assets can be bought and sold on behalf of lenders + borrowers

Question 29

gni

Answer 29

total income generated by a country’s fops, regardless of where they are located

gni = gdp + net factor income (y earnt by domestic workers - y earnt by foreign workers)

Question 30

Yfe

Answer 30

the max level of output an economy can produce using all fops at sustainable levels

Question 31

Inflation

Answer 31

Sustained rise in the average p of g/s in an economy over a period of time reducing purchasing power

Question 32

Structural u

Answer 32

Immobility of labour due to a lt change in the structure of an industry

Question 33

Ad

Answer 33

Total d for a country’s g/s at a given pl in a given time period

=C+g+i+(x-m)

Question 34

Bank run

Answer 34

Not enough liquid st assets to meet st liabilities

Question 35

Globalisation

Answer 35

The process by which national economies become increasingly integrated and interdependent

Question 36

Monetary policy

Answer 36

Changes to the ir sm and ex rate by the central bank to influence ad

Question 37

Fishers eqn of exchange

Answer 37

Money s x velocity of circulation = q of final g+s sold in an economy x average p of g+s sold in an economy

M=p as v+q don’t change st
So only changes in m will affect i

Question 38

Money markets eg

Answer 38

Gov bonds
Interbank lending

Question 39

Multiplier

Answer 39

Any change to components of ad will have an even greater change in national output

Question 40

Marginal propensity to consume

Answer 40

The willingness of a household to spend any extra y that they earn

Question 41

Fiscal/budget surplus/deficit

Answer 41

When t >< g in a year

Question 42

Market bubble

Answer 42

Where the p of assets are much greater than the assets true worth

Question 43

Multi national corp

Answer 43

Firms which function in at least one other country aside from their country of origin

Question 44

Sustainability

Answer 44

Meeting the needs of the present generation without reducing the ability of future generations to meet their own needs

Question 45

M sub

Answer 45

Tariffs on m manufactured goods to allow domestic industries to grow

Question 46

Trade creation

Answer 46

Movement from a high cost domestic/foreign producer to a low cost producer inside the customs union