Definitions Flashcards
Availability of credit
Funds available for firms and households to borrow
Base year
The first year in an economic or financial index
Black (informal, shadow) market
Economic activities that occur below the government’s radar
Claimant count
A method of measuring unemployment by counting all of those who claim the jobseekers allowance and other unemployment benefits
Consumer price index (CPI)
official measure used to calculate the rate of consumer price inflation, using a basket of common goods
Credit crunch
occurs when there’s a low availability of credit in the economy
Economic shock
Unexpected events and their effects on economies; may be demand side or supply side
Exchange rate
the price of a currency measured in terms of another currency
Exports
domestically produced goods and services sold to residents of other countires
Full employment
all those willing and able to work are able to find jobs
Gross National Income (GNI)
Sum of value added by all producers who reside in a nation, plus product taxes not included in the value of output, plus receipts of primary income from abroad
Gross National Product (GNP)
Market value of all products produced per annum by the labour and property supplied by the citizens of one country
Imports
non-domestically produced goods and services sold to residents of this country
Index numbers
numbers allowing accurate comparisons over time to be made. the base year value is typically 100
Inflation target rate
The CPI inflation rate target is set by the government, which the Bank of England attempts to achieve, currently 2%
Job Seekers Allowance (JSA)
Unemployment-related benefit
Labour force survey
A quarterly survey of UK households, recording information on the personal employment circumstances of the correspondents
Liquidity
The ease with which an asset can be turned into cash without loss or delay
Macroeconomics
Involves the study of the whole economy at the aggregate level
Macroeconomic stability
Occurs when there is a low volatility of key macroeconomic indicators
Marginal propensity to consume (MPC)
The proportion of an increase in disposable income that is spent on consumer goods
National wealth
The stock of all goods with value in the economy
Performance indicator
Provides information used to judge success of failure of a government policy
Policy instrument
Tool or set of tools used to try and meet a policy objective
Policy objective
A target/ goal policy-makers aim to hit
Price Index
An index number showing the extent to which a set of prices has changed in comparison to the prices in the base year
Purchasing Power Parity (PPP)
Adjustments of exchange rates to reflect the actual purchasing power of a currency
Retail price index (RPI)
An older measure used to calculate the rate of consumer price inflation
Wealth
Stock of assets
Weighting
When certain data items in a set are assigned a higher or lower importance than other data items in the set
Accelerator
A change in the level of investment into capital goods, brought about by a growth of aggregate demand
Actual output
level of actual output produced in the economy in a year
Aggregate demand
Total planned spending on real output produced by the economy
Aggregate supply
Total real national output
Autonomous consumption
The minimum level of consumption in society needed to sustain a basic standard of living
Boom/bust policy
When the government enacts policies to stimulate then contract the economy
Circular flow of income
The circulation of national income, output and expenditure between economic agents, such as firms and households
Full employment income
Total output of an economy when output is minimised
Funding for Lending Scheme (FLS)
Scheme allowing banks to borrow cheaply from the Bank of England, on the condition that they lend the money out to promote economic growth
Gross Domestic Product (GDP)
The sum of all goods and services produced in an economy over a period of time
Injection
Spending power entering the circular flow of income resulting from investment, government spending and exports
Keynesian economists
Followers of the economist John Maynard Keynes, who believe the government should generally manage the economy
Long run aggregate supply (LRAS)
Aggregate supply when the economy produces its productive potential
Monetarists
Economists who believe increases in the money supply is a significant factor of inflation
Multiplier
The relationship between a change in aggregate demand and the resulting change in national income
Multiplier ratio
Number of times a rise in national income is larger than the rise in the initial injection of AD, which led to the rise in national income
National capital stock
Stock of capital in the economy
National income
The flow of new output produced by the economy
National output
The same as national income, The flow of new output produced by the economy
National product
The same as national income, The flow of new output produced by the economy
Nominal GDP
GDP measured at current market prices, without taking into account the effects of inflation
Pro-free market economists
Opponents of Keynesian economists, who believe the government should generally leave the markets to operate freely
Real GDP
GDP measured, taking into account the effects of inflation
Real wage
The purchasing power of the nominal wage, after taking into account the effects of inflation
Real wage unemployment
Unemployment caused by real wages being stuck above the equilibrium wage rate
Red tape
Unnecessary business regulation
Saving
Unspent income
Short run aggregate supply (SRAS)
Aggregate supply when the level of capacity is fixed, though existing factors can be utilised more or less to impact real output
Short run economic growth
An increase in the real output by taking up slack in the economy
Sovereign wealth fund
Government or state run fund created by profits from natural resources
Technological progress
When technological change results in more output for the same quantity of input
Trend growth rate
The level of economic growth that is sustainable, without putting upward pressure on inflation
Withdrawal
Spending power exiting the circular flow of income resulting from savings, taxation and imports
Activity rate/ participation rate
Proportion of the population of working age in a job or actively seeking work
Balance of payments
Record of a country’s trading and financial transactions with the rest of the world
Balance of payments equilibrium
Occurs where the balance of payments is relatively balanced over a few years
Balance of trade
Difference between the monetary value of an economy’s exports and their imports
Balance of trade deficit
When the monetary value of an economy’s imports exceed their exports
Balance of trade in goods
Part of the current account comparing the difference in the monetary value of an economy’s exported goods and their imported goods
Balance of trade in services
Part of the current account comparing the difference in the monetary value of an economy’s exported services and their imported services
Balance of trade surplus
When the monetary value of an economy’s exports exceed their imports
Closed economy
A country with no international trade
Cost push inflation
A rise in the price level due to an increase in costs of prodcution
Current account balance of payments
Measures monetary flow into/out of an economy based on balance of trade in goods and services, primary income and secondary income
Deflation
The persistent fall in the average price level
Demand pull inflation
A rise in the price level due to an increase in AD
Disinflation
A fall in the rate of inflation
Economic cycle
Upswings and downswings in the aggregate economic activity over a period of time
