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Economics > Economics Unit 2 > Flashcards

Economics Unit 2 Flashcards

1
Q

Aggregate demand

A

Total demand in the economy made up of consumption, investment, government expenditure and net exports. Known by the identity: C+I+G+(X-M) = AD

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2
Q

Aggregate Supply

A

The total value of goods and services supplied in the economy.

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3
Q

Imports

A

Goods or services purchased from abroad.

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4
Q

Economic Growth

A

The capacity of the economy to produce more goods and services over time.

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5
Q

Gross Domestic Product

A

The total value of goods and services produced in the economy.

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6
Q

Negative Output Gap

A

Where the economy is producing less than its trend output.

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7
Q

Positive Output Gap

A

When actual GDP exceeds trend GDP increasing inflationary pressure.

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8
Q

Trade-off

A

Where one macroeconomic objective has to be curtailed in favour of another objective.

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9
Q

Unemployment

A

Those without a job but who are seeking work at current wage rates.

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10
Q

Exports

A

Goods or services sold abroad.

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11
Q

Employment

A

Where labour is actively engaged in a productive activity usually in exchange for payments such as wages.

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12
Q

Exporting

A

The sale of goods or services to a foreign country, generates income for the home country.

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13
Q

Importing

A

The purchase of goods and services from abroad, leads to expenditure for the home country.

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14
Q

Economic indicators

A

Economic statistics that provide information about the expansions and contractions of business cycles.

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15
Q

Nominal GDP

A

GDP/income/output figures not adjusted for inflation.

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16
Q

Real GDP

A

GDP/income/output figures adjusted for inflation

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17
Q

GDP per capita

A

GDP divided by the population, a measure of living standards.

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18
Q

Weighting

A

Where a commodity is given a weighting proportional to its importance in the general pattern of consumer spending

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19
Q

Index numbers

A

A weighted average of a group of items compared to a given base value of 100.

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20
Q

Economic models

A

These are used to show the essential characteristics of complicated economic conditions in order to analyse them and predict the result of changes of variables.

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21
Q

Recession

A

When an economy is growing at less than its long-term trend rate of growth.

22
Q

Balance of Payments

A

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

23
Q

Flow

A

Measured over a specified period of time

24
Q

Stock

A

A quantity measured at a particular point in time

25
Q

Injections

A

Money that originates outside the circular flow and so will increase national income/output/expenditure

26
Q

Withdrawals

A

Any money not passed on in the circular flow and has the effect of reducing national income/output/expenditure

27
Q

Investment

A

Spending by firms on buildings, machinery and improving the skills of the labour force

28
Q

Savings

A

A withdrawal from the circular flow

29
Q

Income Induced

A

Will increase as income increases and decrease as income decreases

30
Q

Multiplier Effect

A

Where an increase or decrease in spending leads to a larger than proportionate change in the national income

31
Q

Net Government Spending

A

The difference between the government spending and taxation

32
Q

Fiscal Policy

A

The policy of the government regarding taxation and government expenditure

33
Q

Positive Expectations

A

Businesses expect the future sales and profits to improve due to factors like increased aggregate demand

34
Q

Negative Expectations

A

Businesses expect future sales and profits to be less due to factors like falling aggregate demand

35
Q

Accelerator Effect

A

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

36
Q

Privatisation

A

Sale of government-owned assets to the private sector

37
Q

Classical View

A

Economists who believed that recessions and slumps would cure themselves

38
Q

Long-run Aggregate Supply

A

The economy’s productive capacity

39
Q

Natural rate of Unemployment

A

The rate of unemployment that is consistent with a stable rate of inflation

40
Q

Productivity

A

A measure of efficiency, measuring the ratio of inputs to outputs; the most common measure is labour productivity, which is the output per worker

41
Q

Monetary Policy Committee

A

A committee of economists/ central bankers who meet monthly and decide whether or not to change the rate of interest

42
Q

Supply-Side Shock

A

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 oil

43
Q

Boom/Bust Policy

A

The government using macroeconomic tools to stimulate and then contract the economy

44
Q

Total Factor Productivity

A

The overall productivity of inputs used by a firm in producing a particular level of output

45
Q

Deflation

A

A situation where prices persistently fall

46
Q

Credit Crunch

A

Where borrowing becomes more expensive or unavailable

47
Q

Participation rates

A

Proportion of the country’s population that makes up the country’s labour force

48
Q

Demand Pull Inflation

A

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

49
Q

Cost Push Inflation

A

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

50
Q

Tight Labour Market

A

Where firms have to increase wages to attract the labour that they require

51
Q

Cyclical Unemployment

A

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

52
Q

Demand deficient Unemployment

A

Insufficient aggregate demand in the economy to employ the available labour

Economics (4 decks)

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