Economic Terms

Question 1

What is a subsidy?

Answer 1

Payment by govt to producers to encourage production of good or service to lower prices

Question 2

Accelerator effect

Answer 2

The relation between the change in new investment and the rate of change of national income

Question 3

Actual supply

Answer 3

The amount that producers produce

Question 4

Aggregate demand

Answer 4

Total planned expenditure in the economy.

Known by C +I +G + (X-M)

Question 5

Aggregate supply

Answer 5

The total value of goods and services supplied in the economy

Question 6

Allocative efficiency

Answer 6

This is achieved in an economy when it is not possible to make anyone better off without making someone worse off, or you cannot produce more of one good without making less of another.

Question 7

Allocative efficiency

Answer 7

This is achieved in an economy when it is not possible to make anyone better off without making someone worse off, or you cannot produce more of one good without making less of another.

Question 8

Balance of payment

Answer 8

Exports minus imports - a deficit means more is imported than exported.

Question 9

Balance of trade

Answer 9

Visible exports minus visible imports

Question 10

Balance of trade

Answer 10

Visible exports minus visible

Question 11

Balanced budget

Answer 11

Where government receipts equal government spending in a financial year.

Question 12

Boom/bust policy

Answer 12

The govt using macroeconomic tools to stimulate and then contract the economy.

Question 13

Broad money

Answer 13

Money that is held in banks and building societies but that is not immediately accessible.

Question 14

Budget deficit

Answer 14

Where govt spending exceeds govt receipts in a financial year (PSNCR)

Question 15

Budget surplus

Answer 15

Where govt receipts exceed govt spending in a financial year . (PSDR)

Question 16

Buffer stock

Answer 16

And intervention system that aims to limit the fluctuations of the price of a commodity

Question 17

Capital spending

Answer 17

Government spending to improve the productive capacity of the nation, including infrastructure, schools and hospitals

Question 18

Central Bank

Answer 18

The financial institution in a country or a group of countries typically responsible for issuing notes and coins and setting short-term interest rates

Question 19

Classic view

Answer 19

Economist who believed that recessions and slumps would cure themselves

Question 20

Commodity

Answer 20

A good that is traded but usually refers to roll materials or semimanufactured goods that are traded in bulk such as Tea , iron ore, oil or wheat. Often they are unbranded goods (homogeneous) were all firms’ products are very similar and on distinguishable from each other

Question 21

Competition

Answer 21

A market situation in which there are a large number of buyers and sellers

Question 22

Complimentary products

Answer 22

Goods that are consumed together for example bread and butter or DVDs and DVD players

Question 23

Complete market failure

Answer 23

Where is the free market fails to provide a product at all i.e. the case of public goods

Question 24

Composite demand

Answer 24

A good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the available supply for the other purpose, typically leading to higher prices, e.g. milk used in butter and cheese

Question 25

Contraction in supply

Answer 25

When the amount offered for sale is reduced because the price level has fallen

Question 26

Contractionary fiscal policy is

Answer 26

Increasing levels of tax revenue relative to government spending, appropriate during a boom in economic activity

Question 27

Contractions in demand

Answer 27

Falls in the quantity demanded cause by rises and prices

Question 28

Cost push inflation

Answer 28

Where in Increased costs of production result in firms increasing their prices leading to an increase in the general price level

Question 29

Cpi consumer price index

Answer 29

A measure of the price level similar to the H I CP or harmonised index of consumer prices used widely in the Eurozone. used since 2004 as the target measure for inflation by the government and MPC

Question 30

Credit crunch

Answer 30

We are borrowing becomes more expensive or unavailable

Question 31

Current account equilibrium

Answer 31

Where the current account exercises no effect on the domestic macroeconomy

Question 32

Current spending

Answer 32

Government spending on the day-to-day running of the public sector, including all materials and wages of public sector workers

Question 33

Cyclical unemployment

Answer 33

Demand deficient unemployment that occurs as a result of the economic cycle

Question 34

Deflation

Answer 34

A situation where prices persistently fall

Question 35

Deindustrialisation

Answer 35

A fall in the proportion of national output accounted for by the manufacturing sector of the economy

Question 36

Demand

Answer 36

The amount that consumers are willing and able to buy at each given price level

Question 37

Demand deficient unemployment

Answer 37

Insufficient aggregate demand in the economy to employ the available labour

Question 38

Demand pull inflation

Answer 38

Where aggregate demand exceeds aggregate supply leading to an increase in the level of prices

Question 39

Demand-side fiscal policy

Answer 39

Changes in the level of structure of government spending and taxation aimed at influencing one on more of the components of aggregate demand

Question 40

Economic indices

Answer 40

Haven’t a clue