Eco4 Flashcards
Market supply
The sum of all individual firm’s supply curves at each given price
Maximum price
The price ceiling above which the price of a good or service is not allowed to increase
Merit good
A good that would be underconsumed in a free market as individuals do not fully perceive the benefits of obtained from consumption
Minimum price
A price floor below which the price of a good or service is not allowed to decrease
Monetary policy
Controlling the macroeconomy via changes in monetary variables such as the money supply or interest rates
Monetary policy committee
The committee of economists and central bankers who meet monthly and decide whether or not to change the rate of interest
Money supply
The total amount of money in an economy
Monopoly
A market structure are dominated by a single seller of a good
Multiplier effect
When increase or decrease in spending leads to a larger than proportionate change in the national income
Narrow money
Notes, coins and balances available for normal transactions
Natural rate of unemployment
The rate of unemployment that is consistent with the stable rate of inflation
Negative expectations
Businesses expect future sales and profits to be less due to factors like falling aggregate demand
Negative externalities
Costs impose on a third party not involved with the consumption of production of a good
Negative output gap
Where The economy is producing less than its trend output
Net government spending
The difference between government spending and taxation
Nominal GDP/nominal national income/nominal output
GDP/income/output figures not adjusted for inflation
Normal goods
Goods or services that will see an increase in demand when incomes rise
Normative statements
Opinions that require value judgements to be made
Occupational immobility
As patterns of demand unemployment change, many workers may find it difficult to easily secure new jobs, since they may lack the necessary skills
Opportunity cost
The next best alternative forgone when an economic decision is made. Note it is only the next best alternative not a range of alternatives
Partial market failure
Where the free market provides a product but with a misallocation of resources
Participation rates
Proportion of the country’s population that makes up the country’s labour force
Planned supply
The amount produces plan to produce at each given price
Policy instrument
Techniques use to achieve policy objectives
Policy objective
Government’s major macroeconomic objectives
Pollution permit
A permit sold to firms by the government, allowing them to pollute up to a certain limit
Positive expectations
Businesses expect the future sales and profits to improve due to factors like increased aggregate demand
Positive externality
A positive spillover effects of third parties of a market transaction
Positive output gap
What actual GDP exceeds trend GDP increasing inflationary pressure
Positive statements
Statements that can be tested against real-world data
Price ceiling
See maximum price
Price elasticity
The responsiveness of demand to a change in the price level. The formula is percentage change in quantity demanded divided by percentage change in price
Price floor
See minimum price
Private good
A good that is both excludable and rifle in consumption
Privatisation
Sale of government owned assets to the private sector
Product markets
Markets in which all kinds of goods and services are traded, for examples the market for airline travel or for mobile phones
Production
The process that converts factor inputs into outputs of goods and services
Production possibility boundary
The PPP indicates the maximum possible output that can be achieved given a fixed set of resources and technology in a particular time period
Productive efficiency
When a firm operates at minimum average total cost, producing the maximum possible output from inputs into the production process
Productivity
A measure of efficiency, measuring the ratio of inputs to outputs; the most common measure is labour productivity, which is the output per worker
Profit
When total income of revenue for a firm is greater than total costs
Public good
A good that possesses the characteristics of nonexcludability and non-rivalry in consumption
Quasi public good
A good that has some of the qualities of a public good but does not fully possess the two required characteristics of non-rivalry and nonexcludability
Real GDP/real national income/real output
GDP/income/output figures adjusted for inflation
Real interest rate
The money rate of interest minus the rate of inflation
Recession
When economy is growing at less than its long-term trend rate of growth
Renewable resources
Resources that are able to be replenished over time whereas nonrenewables such as all and gas are likely to run out
Repo rate
The interest rate that are set by the monetary policy committee of the Bank of England in order to influence inflation. Short for sale and repurchase rate
RPI X
A measure of the price level that excludes payments to service mortgage interest on the retail price index measure. Used as the target measure for inflation by the government and MPC until the end of 2003
Savings
A withdraw from the circular flow
Specialisation
The production of a limited range of goods by an individual factor of production or firm or country, in cooperation with others so that together a complete range of goods is produced
Stock
A quantity measured at a particular point in time
Structural unemployment
Unemployment caused by a change in the demand side or supply side of the economy
Subsidies
Payments by government to producers to encourage production of a good or services. Often subsidies are found in farming where farmers receive funds from government per tonne or unit of output. This typically means that prices can be lower than would otherwise be the case.
Substitutes
Good secondary use as alternatives to another good for example bus and rail services on Mars bars and snickers. Close substitutes are good alternatives, whereas weak substitutes are not very good or likely alternatives, such as gas fired power in the UK and hydroelectric power
Supply
The amount offered for sale at each given price level
Supply-side fiscal policy
Changes in the level or structure of government spending and taxation designed to improve the supply side of the economy through influencing incentives to save, to supply labour, to be entrepreneurial, and to promote investment, which are largely micro economic in nature
Supply-side policies
A range of measures designed to increase aggregate supply and hence the potential output of the economy, though many improvements may come from the private sector
Supply-side shock
Something that will increase or reduce the costs hence supply-side of all firms in the economy e.g. a large increase in the price of a loyal
Sustainable
And activity carried out today that does not stop future generations maximising their welfare
Tight labour market
Where firms have to increase wages to attract the labour that they require
Total factor productivity is
The overall productivity of inputs used by firm in producing a particular level of output
Trade union
An organisation of workers set up to negotiate on wages, working hours and working conditions with employers on behalf of its members
Trade off
We are one macro economic objective has to be curtailed in favour of another objective
Transfer payments
Government payments to individuals for which no service is given in return e.g. state benefits
Transmission mechanism of monetary policy
How changes in the base interest rate influence the components of aggregate demand
Unemployment
Those without a job but who are seeking work at current wage rates
Unemployment trap
Where individuals receive more in benefit payments then they would be paid if they were in a job
Value judgements
Statements or opinions expressed that are not testable or cannot be verified and depend very much on the views of the individual and the values they hold
Variable costs
Course of production that very with output
Visibles
Exports or inputs that are tangible, that you can see and touch as it crosses international boundaries
Voluntary unemployment
Workers who are not prepared to take a job at current wage levels
Wealth
A stock of owned assets e.g. housing property or a portfolio of shares
Weighting
Where a commodity is given a weighting proportional to its importance in the general pattern of consumer spending
Withdrawals
Any money not passed on in the circular flow and has the effect of reducing national income/output/expenditure
Market failure
Where the market fails to produce what consumers require at the lowest possible cost
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