Definitions Flashcards
Interventionist supply side policies
Policies based on the idea that the government has an important role to encourage growth
Supply side policies
Policies that are designed to increase the long-run aggregate supply in the economy by increasing the quantity or quality of factors of production
Fiscal policy
The government’s policy for revenue and expentidure
Monetary policy
Policies around the supply of money and interest rate levels in an economy
Interest
Price of money/opportunity cost of spending or holding money
Nominal interest rate
Rate of interest avaliable excluding any adjustment for inflation
Real interest rate
Rate of interest adjusted for inflation
Aggregate supply
Total amount of goods and services that all industries in an economy will produce at every given price level
Short run aggregate supply
Time period where prices of factors of production do not change - the wage rate is fixed
Aggregate demand
Total spending on goods and services in an economy at a given price level
GDP
Total value of goods and services produced within a country over a given time period
GNI
Total value of goods and services produced by a nations citizens over a given time period (regardless of location)
Recession
Two consecutive quarters of negative economic growth
Monopoly
Where there is only 1 firm in the market, there are high barriers to entry and they make abnormal profit in the long run
Oligopoly
Where a few large firms dominate the industry, produce identical products, distinct barriers to entry, interdependence and stable prices
Collusion
When firms charge the same price on purpose to act as a monopoly
Market power
The ability of a firm to raise the market price of a good/service above its marginal cost by restricting output
Perfect competition
Where there is a large number of small firms, with no control over the price, identical products, no barriers
Productive efficiency
When a firm produces where AC is at its minimum
Allocative efficiency
When a firm produces where supply=demand
Monopolistic competition
A large number of small firms, no major barriers, similar but differentiated products, small control over price/output
Revenue
Income earnt by the firm from it’s business
Short run
Time period where one factor of production is fixed and the others are variable
Long run
All factors of production are variable
Economies of scale
The decrease in average costs of production as it increases the output due to gains in efficiency