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Definitions For Unit 2 Flashcards

1
Q

Actual Growth

A

Economic growth measured by changes in real GDP

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2
Q

Aggregate demand

A

The total level of demand in an economy at any given price at a moment in time

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3
Q

Aggregate supply

A

The total amount of output in the economy at any given price at a moment in time

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4
Q

Animal spirits

A

The level of confidence of business owners

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5
Q

Balance of payments

A

A record of all financial dealings over a period of time between economic agents of one country and another

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6
Q

Boom

A

The peak of the business cycle, when growth is high

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7
Q

Circular flow

A

A model of the economy which shows the flow of goods and services, the factors of production and money around the economy

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8
Q

Claimant count

A

A measure of unemployment; the number of people receiving benefits for being unemployed

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9
Q

Consumer Price Index

A

Official measure used to calculate the rate of inflation, using a weighted basket of goods.

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10
Q

Cost push inflation

A

Inflation caused by a decrease in AS

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11
Q

Current account

A

A record of the payments for the purchase and sale of goods and services, as well as income and transfers

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12
Q

Cyclical unemployment

A

Unemployment caused by a lack of AD

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13
Q

Deflation

A

A persistent fall in prices of goods and services.

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14
Q

Deflationary policy

A

Fiscal or monetary policy which is aimed at reducing AD

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15
Q

Demand pull inflation

A

Inflation caused by an increase in AD

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16
Q

Depreciation

A

The reduction in value of machinery overtime

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17
Q

Direct tax

A

Taxes paid straight to the government by the individual taxpayer

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18
Q

Disinflation

A

A reduction in the rate of inflation

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19
Q

Disposable income

A

The money consumers have left to spend, after taxes have been taken away and benefits added

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20
Q

Economic growth

A

An increase in the long term productive potential in the economy; an increase in the amount of goods and services which are produced, measured by an increase in real GDP

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21
Q

Employed

A

Someone who does more than 1 hour of paid work a week or is temporarily away from work, on a government supported training scheme or does a minimum of 15 hours unpaid work for their family business (ILO definition)

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22
Q

Expansionary policy

A

Fiscal or monetary policy which is aimed at increasing AD

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23
Q

Fiscal policy

A

The use of borrowing, government spending and taxation to manipulate the level of AD and improve macroeconomic performance

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24
Q

Frictional unemployment

A

Unemployment caused when people move between jobs and enter the job market

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25
Gross Domestic Product (GDP)
The value of goods and services produced in a country over a given period of time
26
GDP per capita
Total GDP divided by the population
27
Gross investment
Investment both to replace old machinery that has depreciated and to create/buy new ones
28
Gross National Income (GNI)
The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends
29
Gross National Product (GNP)
The value of goods and services produced by citizens of a country, whether they live in the country or not
30
Inactive
Those neither employed nor unemployed; those not participating in the job market
31
Indirect tax
Tax where the person charged with paying the money to the government is able to pass on the cost to someone else
32
Inflation
The general rise in prices of goods and services that erodes the purchasing power of money
33
Injection
Spending power entering the circular flow of income resulting from investment, government spending and exports
34
Interventionist supply side policies
Policies designed to correct market failure, where the government intervenes in the market
35
Investment
Spending by businesses on capital goods, which leads to the creation of real goods
36
Labour Force Survey
A measure of unemployment which surveys people to class them as unemployed, employed or inactive under the International Labour Organisation (ILO)​ ​definitions
37
Long run aggregate supply (LRAS)
The total output an economy can produce when operating at full output
38
Long run trend growth rate
The average sustainable rate of economic growth over a period of time
39
Marginal propensity to consume
The proportion of an increase in income spent on consumption Change in consumption/change in income
40
Marginal propensity to import
The proportion of an increase in income spent on imports
41
Marginal propensity to save
The proposition of an increase in income that is saved
42
Marginal propensity to tax
The proportion of an increase in income that is taken away in tax
43
Marginal propensity to withdraw
The proportion of an increase in income that is withdrawn from the circular flow
44
Market-based supply-side policies
Policies which are designed to remove anything which prevents the free market system working efficiently
45
Monetary policy
The attempts of the central bank/regulatory authority to control the level of AD by altering base interest rates or the amount of money in the economy
46
Monetary Policy Committee (MPC)
9 economists who meet monthly to set the Bank rate as well as other monetary instruments
47
Multiplier
An increase in an injection will lead to an even greater increase of national income 1/(1-MPC) = 1/MPW
48
National expenditure
The value of spending by households on goods and services
49
National income
The value of income paid by firms to households in return for land, labour, capital and enterprise
50
National output
The value of the flow of goods and services from firms to households
51
Negative output gap
When GDP is lower than predicted; the economy is producing below full output
52
Net investment
Investment adjusted for depreciation; gross investment minus depreciation
53
Nominal GDP
GDP which does not take inflation into account; GDP at current prices
54
Output gap
The difference between the long term trend rate of growth and actual growth
55
Positive output gap
When GDP is higher than predicted; the economy is producing above full output
56
Potential growth
A change in the productive potential of the economy
57
Purchasing Power Parity (PPP)
Exchange rate of one currency to another that compares the cost of living in different countries through comparing a typical basket of goods
58
Quantitative easing
When the central banks buys assets in exchange for money in an attempt to increase the money supply
59
Real GDP
GDP which strips out the effect of inflation
60
Real wage unemployment
Unemployment caused when wages are set above the equilibrium wage rate
61
Recession
The trough of the business cycle, when growth is low. The government defines it as where real GDP falls in at least two successive quarters
62
Retail Price Index (RPI)
An old measure of inflation which has lost its national statistic status
63
Seasonal unemployment
Unemployment caused when an industry only operates during certain times of the year
64
Short-run aggregate supply (SRAS)
Aggregate supply when at least one factor of production is fixed
65
Short run Phillips curve
Shows the relationship between unemployment and inflation: higher levels of unemployment lead to low levels of inflation
66
Structural unemployment
Unemployment cause by the long-term decline of an industry
67
Supply-side policies
Government policies aimed at increasing the productive potential of the economy and shifting LRAS to the right
68
Trade (business) cycle
The tendency of economic growth to rise and fall above and below the trend rate of economic growth, causing booms and busts
69
Underemployment
Those who are working part time, on zero hour contracts or on government training schemes but would prefer to be full time or those employed in areas under their skill level e.g. a graduate working at a bar
70
Unemployed
Those who are without work, able to start work in the next 2 weeks and have actively sought work for the last 4 weeks (ILO definition)
71
Withdrawal
Spending power leaving the circular flow of income resulting from savings, taxation and imports
72
Monetary transmission mechanism
The process by which a central bank’s monetary policy decisions are passed on, through financial markets, to businesses and households.

Economics (14 decks)

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