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Macro > Definitions > Flashcards

Definitions Flashcards

1
Q

Balance of payments

A

A record of a country’s trade and investment with other countries

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2
Q

Business confidence

A

Expectations about the future of the economy

- vital in influencing business decisions about how much to spend on capital goods (investment)

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3
Q

Consumer confidence

A

Expectations about the future based on interest rates, incomes and jobs which affect household expenditure

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4
Q

Cost push inflation

A

Increases in the price level resulting from increases in costs of production

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5
Q

Cyclical unemployment

A

Unemployment resulting from a lack of aggregate demand (demand deficient unemployment)

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6
Q

Depreciation

A

A fall in the value of one currency against another

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7
Q

Disposable income

A

Income after the deduction of direct taxes and the addition of state benefits

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8
Q

Economic growth

A

The growth in the value of output of an economy and, in the long run, an outward shift in the production possibility frontier

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9
Q

Fiscal drag

A

The reduction in disposable income that occurs if tax bands are not adjusted in line with inflation

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10
Q

Frictional unemployment

A

Unemployment arising when people are between jobs

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11
Q

Hyperinflation

A

A very high rate of inflation which causes serious economic problems and political instability

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12
Q

Inflationary noise

A

The distortionary effect inflation can have on price signals

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13
Q

Marginal propensity to consume

A

The proportion of any additional income which is spent rather than saved

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14
Q

Menu costs

A

Costs involved in having to change prices as a result of inflation

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15
Q

Multiplier

A

An increase in an injection into the circular flow of income causing a greater increase in aggregate demand. Formula 1/1-mpc

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16
Q

Shoe leather costs

A

Costs involved in moving money around during a period of inflation in a bid to maintain its real value

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17
Q

Structural unemployment

A

A mismatch in the demand for skills as a result in the changing pattern of industry

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18
Q

Transfer payments

A

Money transferred from one group to another not in return for providing a good or service. Such payments can’t be calculated in calculating GDP

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19
Q

Unemployment trap

A

A situation where some people are financially better off living on unemployment benefits than working

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20
Q

Wealth distribution

A

The extent to which different groups of households share in the total wealth of the country

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21
Q

Actual economic growth

A

An increase in real GDP (as opposed to potential economic growth)

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22
Q

Aggregate demand

A

The total demand for a country’s goods and services at a given price level and in a given time period

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23
Q

Aggregate supply

A

The total value of output all producers in an economy are willing and able to supply at a given price level / in a given period of time.

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24
Q

Appreciation

A

The rise in value of one currency against another

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25
Q

Austerity

A

Economic policy aimed at reducing a governments deficit (or borrowing). Austerity can be achieved through increases in government revenues - primarily increasing tax - and/or reduction in government spending or future spending commitments.

26
Q

Automatic stabilisers

A

Forms of government spending and taxation that dampen down fluctuations without any deliberate changes in government policy

27
Q

Balanced budget

A

Is one in which government spending equals revenues (neither a deficit nor a surplus)

28
Q

Budget

A

A statement of a government’s spending and tax revenues for the next financial year

29
Q

Budget defecit

A

When government spending exceeds tax revenue. Reducing the deficit can be achieved by austerity measures or a period of economic growth.

30
Q

Budget surplus

A

When tax revenue exceeds government spending

31
Q

Capacity utilisation

A

Measures how much of an economy’s productive potential is being used. Utilisation falls during a recession

32
Q

Capital market

A

A stock or bond market where firms can raise money for investment purposes

33
Q

Claimant count

A

The number of people claiming unemployment-related benefits. One of the measures of unemployment (cf. Labour Force Survey)

34
Q

Comparative advantage

A

The ability to produce a product at a lower opportunity cost than other countries, regions, firms or people.

35
Q

Consumer Price Index

A

This is the preferred meaner of inflation which excludes housing costs but includes all households. (cf. retail price index)

36
Q

Circular Flow of Income

A

This is the flow of products/services and income between producers/firms and households/consumers

37
Q

Closed economy

A

An economy which is operating without imports or exports

38
Q

Corporation tax

A

A tax on a firms profits; a direct tax

39
Q

Current account balance

A

A record of a country’s trade in goods, trade in services, income and current transfers

40
Q

Cyclical trade deficit

A

A trade deficit which that arises purely due to changes in the economy’s cycle, e.g many countries run a deficit when their economy is growing strongly as increased aggregate demand sucks in imports

41
Q

Deflation

A

A sustained fall in the average price level - ‘inflation’ below 0%

42
Q

Deflationary fiscal policy

A

Measures using government spending and/or taxation designed to reduce aggregate demand

43
Q

Demand management policies

A

This refers to the range of monetary and fiscal policies to influence the aggregate demand for goods and services in an economy

44
Q

Demand pull inflation

A

Increases in the average price level resulting from excessive increases in aggregate demand

45
Q

Deregulation

A

The removal of laws and regulations which restrict competition

46
Q

Developing countries

A

Countries generally lacking a high degree of industrialisation and/or other measures of development

47
Q

Direct taxes

A

Taxes on income and wealth of people and firms. Income and corporation taxes are direct taxes.

48
Q

Discretionary income

A

Income after the deduction of direct taxes and essential bills and the addition of state benefits (cf. disposable income)

49
Q

Disequilibrium

A

A situation of unbalance

50
Q

Dividends

A

A share in the profits of firms which is distributed to shareholders

51
Q

Domestic trade

A

The exchange of products within an economy

52
Q

Dumping

A

When a producer in one country exports a product to another country at a price below that which it charges in its home country or below the costs of supply

53
Q

Economic Cycle

A

Variations in the annual rate of growth of an economy over time. The stages of the cycle include recovery, boom, slow down and recession

54
Q

Economic Growth

A

The growth in the value of output of an economy and, in the long run, an outwards shift in the production possibility frontier

55
Q

Economic stability

A

The avoidance of volatility in economic growth rates, inflation, unemployment and exchange rates

56
Q

Economically inactive

A

Those who are of working age but are neither in work nor actively seeking work

57
Q

Exchange rate

A

a

58
Q

Expansionary Monetary Policy

A

Changes in the money supply (increase), rate of interest (cut) and/or exchange rate (lower) which are designed to simulate aggregate demand

59
Q

Expectations

A

How we anticipate the future to unfold. This can have powerful effects on the decisions of households, firms and governments.

60
Q

Fiscal Policy

A

The taxation and spending decisions of a government

Macro (7 decks)

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