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Econ theme 2 Flashcards

1
Q

What is actual growth?

A

Economic growth measured by changes in real GDP

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2
Q

Define aggregate demand (AD)

A

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

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3
Q

What is aggregate supply (AS)?

A

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

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4
Q

What do animal spirits refer to?

A

The level of confidence of business owners

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5
Q

What is the 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

What is a base year?

A

A year chosen as a good comparison in series of data when building an index; it is automatically given an index figure of 100

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7
Q

What is a boom in economic terms?

A

The peak of the business cycle, when growth is high

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8
Q

What does a budget entail?

A

Where the government lays out their spending and taxation plans

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9
Q

Define budget deficit

A

When the government spends more money than it receives

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10
Q

What is a budget surplus?

A

When the government receives more money than it spends

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11
Q

What is the circular flow model?

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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12
Q

What is the claimant count?

A

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

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13
Q

Define Consumer Price Index (CPI)

A

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

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14
Q

What does consumption refer to in economics?

A

Consumer spending on goods and services

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15
Q

What is cost push inflation?

A

Inflation caused by a decrease in AS

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16
Q

What does the current account record?

A

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

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17
Q

What is a current account deficit?

A

When more money leaves the country than enters, so the current account is negative

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18
Q

Define current account surplus

A

When more money enters the country than leaves, so the current account is positive

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19
Q

What is cyclical unemployment?

A

Unemployment caused by a lack of AD

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20
Q

What is deflation?

A

A persistent fall in prices of goods and services

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21
Q

What is a deflationary policy?

A

Fiscal or monetary policy which is aimed at reducing AD

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22
Q

Define demand pull inflation

A

Inflation caused by an increase in AD

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23
Q

What is depreciation in economic terms?

A

The reduction in the value of machinery over time

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24
Q

What is a direct tax?

A

Taxes paid straight to the government by the individual taxpayer

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25
What does disinflation refer to?
A reduction in the rate of inflation
26
What is disposable income?
The money consumers have left to spend after taxes have been taken away and benefits added
27
Define economic growth
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
28
Who is considered employed according to the ILO definition?
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
29
What is an expansionary policy?
Fiscal or monetary policy which is aimed at increasing AD
30
What are exports?
Goods or services sold to foreigners that bring income into the country
31
Define export-led growth
Economic growth arising from an increase in exports
32
What is fiscal policy?
The use of borrowing, government spending and taxation to manipulate the level of AD and improve macroeconomic performance
33
What is frictional unemployment?
Unemployment caused when people move between jobs and enter the job market
34
Define Gross Domestic Product (GDP)
The value of goods and services produced in a country over a given period of time
35
What is GDP per capita?
Total GDP divided by the population
36
What is gross investment?
Investment both to replace old machinery that has depreciated and to create/buy new ones
37
Define 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
38
What is Gross National Product (GNP)?
The value of goods and services produced by citizens of a country, whether they live in the country or not
39
What does government spending refer to?
Spending by the government for the provision of goods and services
40
What are imports?
Goods and services bought from foreigners that takes income out of the country
41
Who are considered inactive individuals?
Those neither employed nor unemployed; those not participating in the job market
42
What is income in economic terms?
A flow of assets
43
What is an index number?
Numbers allowing accurate comparisons over time to be made. The base year value is typically 100
44
Define indirect tax
Tax where the person charged with paying the money to the government is able to pass on the cost to someone else
45
What is inflation?
The general rise in prices of goods and services that erodes the purchasing power of money
46
What is an injection in the circular flow?
Spending power entering the circular flow of income resulting from investment, government spending and exports
47
What are interventionist supply side policies?
Policies designed to correct market failure, where the government intervenes in the market
48
What is investment in economic terms?
Spending by businesses on capital goods, which leads to the creation of real goods
49
What does the Labour Force Survey measure?
A measure of unemployment which surveys people to class them as unemployed, employed or inactive under the International Labour Organisation (ILO) definitions
50
What are living standards?
The quality of life enjoyed by people in a country
51
What does long run refer to in economics?
When all factors of production are variable
52
Define long run aggregate supply (LRAS)
The total output an economy can produce when operating at full output
53
What is the long run trend growth rate?
The average sustainable rate of economic growth over a period of time
54
What is the marginal propensity to consume?
The proportion of an increase in income spent on consumption
55
What is the marginal propensity to import?
The proportion of an increase in income spent on imports
56
Define marginal propensity to save
The proportion of an increase in income that is saved
57
What is the marginal propensity to tax?
The proportion of an increase in income that is taken away in tax
58
What does marginal propensity to withdraw refer to?
The proportion of an increase in income that is withdrawn from the circular flow
59
What are market-based supply-side policies?
Policies which are designed to remove anything which prevents the free market system working efficiently
60
What is 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
61
What is the Monetary Policy Committee (MPC)?
9 economists who meet monthly to set the Bank rate as well as other monetary instruments
62
What is monetary supply?
Stock of money in the economy
63
What is the multiplier effect?
An increase in an injection will lead to an even greater increase of national income
64
What does national expenditure refer to?
The value of spending by households on goods and services
65
Define national income
The value of income paid by firms to households in return for land, labour, capital and enterprise
66
What is national output?
The value of the flow of goods and services from firms to households
67
What is a negative output gap?
When GDP is lower than predicted; the economy is producing below full output
68
What are net exports?
Exports minus imports
69
What is net investment?
Investment adjusted for depreciation; gross investment minus depreciation
70
Define nominal GDP
GDP which does not take inflation into account; GDP at current prices
71
What is the output gap?
The difference between the long term trend rate of growth and actual growth
72
What is a positive output gap?
When GDP is higher than predicted; the economy is producing above full output
73
What does potential growth refer to?
A change in the productive potential of the economy
74
Define purchasing power parity
Exchange rate of one currency to another that compares the cost of living in different countries through comparing a typical basket of goods
75
What is quantitative easing?
When the central banks buys assets in exchange for money in an attempt to increase the money supply
76
What is real GDP?
GDP which strips out the effect of inflation
77
What is real wage unemployment?
Unemployment caused when wages are set above the equilibrium wage rate
78
Define recession in economic terms
The trough of the business cycle, when growth is low. Defined as where real GDP falls in at least two successive quarters
79
What is the Retail Price Index (RPI)?
An old measure of inflation which has lost its national statistic status
80
What are savings in economic terms?
The decision by consumers to postpone consumption
81
What is seasonal unemployment?
Unemployment caused when an industry only operates during certain times of the year
82
What does short run refer to in economics?
When at least one factor of production is fixed
83
Define short run aggregate supply (SRAS)
Aggregate supply when at least one factor of production is fixed
84
What does the short run Phillips curve show?
The relationship between unemployment and inflation: higher levels of unemployment lead to lower levels of inflation
85
What is structural unemployment?
Unemployment caused by the long-term decline of an industry
86
What are supply-side policies?
Government policies aimed at increasing the productive potential of the economy and shifting LRAS to the right
87
What is total GDP?
The GDP of the whole country
88
What is the 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
89
What is 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
90
Who is considered unemployed according to the ILO definition?
Those who are without work, able to start work in the next 2 weeks and have actively sought work for the last 4 weeks
91
What is the value of GDP?
Nominal values of GDP; GDP at current prices
92
What is the volume of GDP?
Real values of GDP; the size of the basket of goods
93
Define wealth in economic terms
A stock of assets
94
What is a withdrawal in the circular flow?
Spending power leaving the circular flow of income resulting from savings, taxation and imports

Economics theme (4 decks)

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