Definitions A->D(e) Flashcards
What is absolute advantage?
A country has an absolute advantage if it can produce more of a good than other countries from the same amount of resources.
What does the term accelerator refer to in macroeconomics?
A change in the level of investment in new capital goods induced by a change in national income or output.
Define actual output.
The level of real output produced in the economy in a particular year.
What is aggregate demand?
Total planned spending on real output in the economy at different price levels.
What does aggregate supply represent?
The level of real national output that producers are prepared to supply at different average price levels.
What is meant by aid in the context of macroeconomics?
Money, goods, and services given by the government or institutions to help another country.
What are assets?
The resources which people or organisations own.
Define automatic stabilisers.
Fiscal policy instruments that automatically stimulate aggregate demand in an economic downswing.
What does availability of credit refer to?
Funds available for households and firms to borrow.
What is the balance of payments?
A record of all the currency flows into and out of a country in a particular time period.
What is the Bank Rate?
The rate of interest that the Bank of England pays to commercial banks on their deposits.
What is balance of primary income?
Inward primary income flows comprising both inward-income flowing into the economy.
What are bonds?
Financial securities sold by companies or governments as a form of long-term borrowing.
What is balance of secondary income?
Current transfers, e.g., gifts of money, international aid, and transfers between countries.
What is broad money?
The part of the money supply made up of cash and other liquid assets.
What does balance of trade measure?
The difference between the money value of a country’s imports and its exports.
What is a budget deficit?
Occurs when government spending exceeds government revenue.
What is a balance of trade deficit?
When the money value of a country’s imports exceeds the money value of its exports.
What is balance of trade in goods?
The part of the current account measuring payments for exports and imports of goods.
What does balance of trade in services refer to?
The difference between the payments for the exports and imports of services.
What is balance of trade surplus?
When the money value of a country’s exports exceeds the money value of its imports.
What are capital markets?
Markets where securities such as shares and bonds are issued to raise medium- to long-term financing.
What is capital ratio?
The amount of capital on a bank’s balance sheet as a proportion of its loans.
What is a central bank?
A national bank that provides financial and banking services for its country’s government and banking system, implements the government’s monetary policy, and issues currency.
The Bank of England is the UK’s central bank.
What is claimant count?
The method of measuring unemployment according to those people who are claiming unemployment-related benefits (Jobseeker’s Allowance).
What is a closed economy?
An economy with no international trade.
What is a commercial bank?
A financial institution which aims to make profits by selling banking services to its customers.
Also known as a retail bank or high-street bank.
What is comparative advantage?
Measured in terms of opportunity cost. The country with the least opportunity cost when producing a good possesses a comparative advantage in that good.
What is the consumer prices index?
The official measure used to calculate the rate of consumer price inflation in the UK, calculating the average price increase of a basket of 700 different consumer goods and services.
What is consumption?
Total planned spending by households on consumer goods and services produced within the economy.
What is contractionary fiscal policy?
Uses fiscal policy to decrease aggregate demand and to shift the AD curve to the left.
What is contractionary monetary policy?
Uses higher interest rates to decrease aggregate demand and to shift the AD curve to the left.
What are corporate bonds?
Debt security issued by a company and sold as new issues to people who lend long-term to the company. They can usually be resold second-hand on a stock exchange.
What is corruption?
A barrier holding back economic growth and development, especially in less developed economies.
What is cost-push inflation?
A rising price level caused by an increase in the costs of production, shown by a shift of the SRAS curve to the left.
Also known as cost inflation.
What is a coupon?
The guaranteed fixed annual interest payment, often divided into two 6-month payments, paid by the issuer of a bond to the owner of the bond.
What is credit?
When a bank makes a loan, it creates credit. The loan results in the creation of an advance, which is an asset on the bank’s balance sheet, and a deposit, which is a liability of the bank.
What is a credit crunch?
Occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to obtain financing, and leads to a rise in the cost of borrowing.
What is crowding out?
A situation in which an increase in government or public-sector spending displaces private-sector spending, with little or no increase in aggregate demand.
What is a currency union?
An agreement between a group of countries to share a common currency, and usually to have a single monetary and foreign exchange rate policy.
What does the current account measure?
All the currency flows into and out of a country in a particular time period in payment for exports and imports of goods and services, together with primary and secondary income flows.
Previously known as income flows and transfers.
What is a current account deficit?
Currency outflows in the current account exceed the currency inflows.
What is a current account surplus?
Currency inflows in the current account exceed the currency outflows.
What are customs unions?
Trading blocs in which member countries enjoy internal free trade in goods and possibly services, with all the member countries protected by a common external tariff barrier.
What is a cyclical budget deficit?
The part of the budget deficit which rises in the downswing of the economic cycle and falls in the upswing of the cycle.
What is cyclical unemployment?
Unemployment caused by a lack of aggregate demand in the economy, occurring when the economy goes into a recession or depression.
Also known as Keynesian unemployment and demand-deficient unemployment.
What is debt?
People’s financial liabilities or money they owe.
What is deficit financing?
Deliberately running a budget deficit and then borrowing to finance the deficit.
What is deflation?
A continuing tendency for the average price level to fall.
What is deindustrialisation?
The decline of manufacturing industries, together with coal mining.
What is demand-pull inflation?
A rising price level caused by an increase in aggregate demand, shown by a shift of the AD curve to the right.
Also known as demand inflation.
What does demand side relate to?
The impact of changes in aggregate demand on the economy.
Associated with Keynesian economics.
What is demand-side fiscal policy?
Used to increase or decrease the level of aggregate demand through changes in government spending, taxation, and the budget balance.
What is deregulation?
Involves removing previously imposed regulations. It is the opposite of regulation.
What is capital?
Physical assets or resources that are used in the production of goods and services.
