Econmics Year 1 Topic 2 Flashcards
1
Q
balance of payments accounts
A
A record of all financial dealings over a period of time between economic agents of one country and all other countries.
2
Q
balance of trade
A
The value of visible exports minus visible imports
3
Q
Current account
A
That part of the balance of payments account where payments for the purchase and sale of goods and services are recorded
4
Q
Current balance
A
The difference between the value of total exports and total imports
5
Q
Current account deficit
A
a deficit exists when imports are greater then exports
6
Q
current account surplus
A
A surplus exists when the value of exports are greater then imports
7
Q
Invisibles
A
Trade in services, transfers of income and other payments or receipts
8
Q
Visables
A
Exports or imports that are raw materials it crosses international boundaries
9
Q
Foreign Direct Investment
A
An investment made by a firm or individual in one country into business interests located in another country
10
Q
Investment income
A
The most common types of investment income are income on equity (dividends) and income on debt (interest)
11
Q
Aggregate Demand
A
The total of all demands in the economy at any given price
C+I+G(X-M)
12
Q
consumption
A
using goods and services
13
Q
disposable income
A
money left after taking out taxes
14
Q
durable goods
A
goods that last for a relatively long time such as a car
15
Q
non-durable goods
A
goods that last a short period of time such as ice cream
16
Q
investment
A
The addition to the capital stock of the economy.
17
Q
Retained profit
A
Profit which is kept back in the business and used to pay for investment in the business.
18
Q
animal spirits
A
Business confidence: the mood of managers and owners of firms about the future of their industry and the wider economy.
19
Q
Accelerator theory
A
the theory that the level of investment is related to past changes in income
20
Q
Gross National Product (GNP)
A
Is the total value of all the goods and services produced by a nation in a single year both domestically and overseas
21
Q
Gross Domestic Product (GDP)
A
A measurement of the total goods and services produced within a country.
22
Q
Gross National Income (GNI)
A
The value of the output of goods and services produced in a country in a year, including money that leaves and enters the country
23
Q
hidden economy
A
Economic activity where trade and exchange take place but which goes unreported to the tax authorities
24
Q
standard of living
A
How well off is an individual, household or economy, measured by variables such as income and health
25
Boom or peak
Period of time when the economy is growing strongly and is operating above its productive potential
26
Recession
Two successive quarters of reduced economic activity
27
Demand-side shock
A sudden and large impact on aggregate demand.
28
Supply-side shock
A sudden and large impact on aggregate supply.
29
anticipated inflation
Increases in prices which economic actors are able to predict
30
consumer prices index
A measure of changes in the price of a representative basket of consumer goods and services.
31
cost-push inflation
inflation caused by increases in costs of production
32
demand-pull inflation
Inflation which is caused by excess demand
33
hyper inflation
Large increases in the price level
34
unanticipated inflation
Increases in prices which economic actors failed to predict
35
Price level
The average price of goods and services in the economy
36
Indexation
Adjusting the value of economic variables such as wages or the rate of interest in line with inflation
37
Active population
Those in work or actively seeking work also know as the labour force
38
Cyclical or demand-deficient unemployment
Unemployment when an economy is not in a boom
39
Employed
The number of people in paid work
40
frictional unemployment
When workers are unemployed for short lengths of time between jobs.
41
Inactive
The number of those not in work
42
Labour force
Those in work or actively seeking work
43
Real wage or classical unemployment
When workers are unemployed because real wages are too high and inflexible downwards, leading to insufficient demand for workers from employers.
44
seasonal unemployment
When workers are unemployed at certain times of the year, such as building workers or agricultural workers in winter.
45
structural unemployment
unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
46
Unemployed
Occurs when individuals are without a job but seeking
47
The claimant count
A measure of unemployment that includes those receiving unemployment-related benefits
48
LFS
LFS unemployment is calculated using labour force survey statistics.
49
Primary income
Balence of payments: Primary income is the net flow of profits, interest and dividends from investments in other countries
50
Trade in goods
exports and imports of visible or tangible items such as car
51
Trade in services
exports and imports of services such as financial services
52
Secondary income
Part of BOP,government transfers to and from overseas agencies such as the EU
53
surplus
An excess amount
54
Under employment
Those who would work more hours if possible or are in jobs below skill level
55
investment
The addition to the capital stock of the economy.
56
Accelerator theory
the theory that the level of investment is related to past changes in income
57
Trade liberalisation
Reduction of regulations for imports
58
Protectionist policies
Increase of regulations for imports
59
Tariff
Taxing items that come from abroad
60
Quota
A limit placed on the quantities of a product that can be imported
61
demand-pull inflation
Demand pull inflation occurs when the aggregate demand rises and there is no increase in aggregate supply
62
Causes of demand pull inflation
Consumer spending may rise excessively or firms may substantially increase their spending on investment
63
cost-push inflation
Cost push inflation occurs because of rising costs
64
Causes of cost push inflation
1. Rise in the costs of production
2. Fall in the exchange rate
3. Fall in productivity
4. Increase in trade union power
65
The costs of high inflation-
Growth and unemployment
Unanticipated inflation makes it difficult to plan for the future therefore little investment
66
The costs of high inflation-
International Competitiveness
If inflation rises faster in the UK than in other countries the value of the pound doesn't change on foreign markets therefore exports will become less competitive
67
The costs of high inflation-
Redistributional costs
Inflation can redistribute income and wealth between households, firms and the state
68
The costs of high inflation-
Psychological and political costs
People feel worse off even if they're incomes rise more then inflation
69
The costs of high inflation-
Shoe-leather costs
When prices aren't stable firms and consumers are less clear what a reasonable price is.
70
The costs of high inflation-
Menu costs
Restaurants have to change their menus to show increased prices
71
Bottlenecks
Supply-side constraints in a particular market in an economy which prevent higher growth for the whole economy
72
Deregulation
the process of removing government control from markets
73
industrial policy
Government policy to promote and support individual firms which it considers are important for the growth of the economy
74
Interventionist policies
Government policies designed to correct market failures that are reducing the growth rate of the economy
75
Labour market flexibility
The degree to which demand and supply in a labour market respond to external changes to return the market to equilibrium
76
Market-based policies
Government policies designed to promote economic growth by reducing barriers to the efficient working of free markets
77
Privatisation
The sale of public sector organisations to the private sector
78
Red tape
Rules and regulations issued by government which firms must adhere to operate legally
79
Unemployment trap
Occurs when an individual is little better off or even worse off when getting a job after being unemployed because of the combined effect of increased tax and benefit withdrawal
80
multiplier
1/(1-MPC)
81
Marginal Propensity to Consume (MPC)
the increase in consumer spending when disposable income rises
82
Marginal Propensity to Consume (MPC) equation
change in consumption/change in income
83
Injections (part of the CIRCULAR FLOW MODEL)
Government spending, consumption and exports
84
Leakages (CIRCULAR FLOW MODEL)
savings, taxes and imports
85
monetary policy
the setting of the money supply by policymakers in the central bank
86
fiscal policy
Government policy that attempts to manage the economy by controlling taxing and spending.
87
Positive output gap
When actual GDP exceeds trend GDP
88
Negative output gap
When actual GDP is below the tend GDP
89
quantitative easing
when the central bank buys bonds from lower banks for cash to boost economic activity
90
expansionary
involves cutting taxes and increasing government spending to encourage economic growth
91
Contractionary
Policy implemented to decrease the money supply in an economy
92
Fiscal deficit (Budget deficit)
When government spending is higher then receipts
93
Purchasing Power Parity
an exchange rate of one currency for another which compares how much a typical basket of goods in one country costs compared to another country
94
Gross National Income (GNI)
The value of the output of goods and services produced in a country over a period of time plus interest payment and dividends
95
GNI is used to measure what?
Standerd of living
96
Real or volume
Is adjusted to inflation
97
Nominal or value
The value of the prices on the day
98
Green GDP
A measure of the total output of an economy having taken into account the environmental externalities
99
Disinflation
a reduction in the rate of inflation
100
Deflation
a decrease in the general level of prices
101
Stagflation
high inflation and high unemployment
102
Deflationary policies
Reducing economic growth
103
wealth effect
The tendency for people to increase their consumption spending when the value of their financial and real assets rises and to decrease their consumption spending when the value of those assets falls.
104
Inflation
The general increase in the price level of goods and services
105
Deflation
A sustained fall in the rate of inflation
106
Comparing national income over time:
-prices
-accuracy
-changes in population
-quality of goods & services
-defence
-consumption & investment
-externalities
107
Benefits to economic growth:
-higher life expectancy
-most people can read and write
108
Negatives of economic growth:
-growth is unsustainable
-increasing inequality’s
-growth & happiness
109
Negatives of economic growth:
Growth & happiness
They found income and happiness are positively related in low income but not high income.
So high income countries instead of increasing GDP should contribute to factors that make happiness:
Quality of relationships
Working less hours
110
Negatives of economic growth: growth is unsustainable
-Increase in GDP is associated with pollution as we use lots of non renewables
111
Direct tax
A tax levied onto a person or organisation
112
Indirect tax
A tax on a good or service
113
Marginal propensity to import
The increase in imports divided by the increase in income
114
Marginal propensity to save
The increase in saving divided by the increase in income
115
Marginal propensity to tax
The increase in tax revenues divided by the increase in income
116
Marginal propensity to withdraw
MPS+MPT+MPM
Save+tax+import
117
Net investment
Gross investment - depreciation
118
National income
Total spending on goods and services
119
Circular flow of income
Money flows around the economy between households and firms
120
Market-based policies
Are designed to remove barriers to the efficient working of free markets
