Definitions D->F(i) Flashcards
What is a direct tax?
A tax that cannot be shifted by the person legally liable to pay the tax onto someone else.
Direct taxes are levied on income and wealth.
What does discretionary fiscal policy involve?
Making discrete changes to manage the level of aggregate demand.
This includes adjustments in government spending and taxation.
Define disinflation.
A slowing down in the rate of inflation, e.g., from 3% to 2%.
Disinflation indicates a decrease in the rate at which prices rise.
What is meant by the distribution of income?
The spread of different incomes among individuals and different income groups in the economy.
What is the economic cycle?
Also known as a business cycle or trade cycle; it refers to upswing and downswing in economic activity taking place over 4 to 12 years.
What is an economic shock?
An unexpected event hitting the economy.
Economic shocks can be demand-side or supply-side and can be either unfavorable or favorable.
What is education and training?
Education develops individual knowledge and intellect, while training develops work skills. Both are essential for economic growth and development.
Define equilibrium national income.
The level of income at which withdrawals from the circular flow of income equal injections into the flow.
What does equilibrium unemployment refer to?
Exists when the economy’s aggregate labor market is in equilibrium; it is the same as the natural level of unemployment.
What is equity in economic terms?
The assets which people own.
What is the European Union?
An economic and partially political union established in 1993 after the ratification of the Maastricht Treaty.
What is the eurozone?
The name used for the group of EU countries that have replaced their national currencies with the euro.
What is an exchange rate?
The external price of a currency, usually measured against another currency.
What is expansionary fiscal policy?
Uses fiscal policy to increase aggregate demand and to shift the AD curve to the right.
What is expansionary monetary policy?
Uses lower interest rates to increase aggregate demand and to shift the AD curve to the right.
What is an expenditure-reducing policy?
A government policy that aims to eliminate a current account deficit by reducing the demand for imports.
What is an expenditure-switching policy?
A government policy that aims to reduce a current account deficit by switching domestic demand away from imports to domestically produced goods.
Define export-led growth.
In the short run, economic growth resulting from an increase in exports; in the long run, growth resulting from the competitiveness of exporting industries.
What are export subsidies?
Money given to domestic firms by the government to encourage firms to sell their products abroad.
What are exports?
Domestically produced goods or services sold to residents of other countries.
What is the financial account in the balance of payments?
The part that records capital flows into and out of the economy.
What is the role of the Financial Conduct Authority?
To ensure that financial markets work well so consumers get a fair deal.
What are financial markets?
Markets in which financial assets or securities are traded.
What does the Financial Policy Committee do?
Identifies, monitors, and takes action to remove or reduce systemic risks in the UK financial system.
Define fiscal policy.
The use by the government of spending and taxation to try to achieve policy objectives.
What is a fixed exchange rate?
An exchange rate fixed at a certain level by the country’s central bank and maintained by intervention.
