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Economics REVISION 2 (Macro) > Key Terms > Flashcards

Key Terms Flashcards

1
Q

AAA credit rating

A

The best credit rating that can be given to a corporation’s or a government’s bonds, effectively indicating that the risk of default is negligible

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2
Q

AS shock

A

Either an inflation shock or a shock to potential national output; adverse AS shocks of both types reduce output and can increase the rate of inflation

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3
Q

Austerity

A

Economic policy aimed at reducing a government’s deficit (or borrowing)

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4
Q

Automatic stabilisers

A

Automatic fiscal changes as the economy moves through stages of the business cycle

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5
Q

Bank run

A

When a large number of people suspect that a bank may go bankrupt and withdraw their deposits.

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6
Q

Bond

A

Both companies and governments can issue bonds. The issue of new government debt is done by the central bank and involves selling debt to capital markets.

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7
Q

Bubble

A

When the prices of securities or other assets rise so sharply and at such a sustained rate that they exceed valuations justified by fundamentals, making a sudden collapse likely

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8
Q

What is capacity utilisation

A

It measures how much of the productive potential of the economy is being used. Utilisation fails during a recession leading to a rise in spare capacity.

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9
Q

Capital market

A

A stock of a bond market where firms can raise money for investment purposes

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10
Q

Capital stock

A

The value of the total stock of capital inputs in the economy

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11
Q

Closed economy

A

An economy operating without imports and exports - closed to global trade

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12
Q

Credit crunch

A

Where banks reduce lending due to falling confidence that loans will be repaid

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13
Q

Current account

A

The overall balance of credits minus debits for trade in goods, trades in services, investment income and transfers

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14
Q

Current account deficit

A

Money going out of s country is more than the amount coming in

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15
Q

Cyclical trade deficit

A

A trade deficit that arises purely due to changes in the economy’s cycle

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16
Q

Cyclical unemployment

A

Unemployment caused by a lack of AD for goods and services

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17
Q

Default

A

A default occurs when a borrower has broken the terms of a loan or other debt

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18
Q

Discretionary fiscal policy

A

Deliberate attempts to affect AD using changes in government spending, direct and indirect taxation and borrowing

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19
Q

Double dip recession

A

When an economy goes into recession twice without a full recovery in between

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20
Q

Economic shocks

A

Unpredictable events such as volatile prices for oil, gas and foodstuffs

21
Q

Expenditure switching policy

A

Policies designed to switch expenditure from imports to domestically produced goods in order to improve the BoP and stimulate GDP

22
Q

Fine-tuning

A

Changes in monetary policy or fiscal policy designed to gradually manage the level of AD and prices

23
Q

Fiscal stimulus

A

Government measures, normally involving increased public spending and lower direct and/or taxation, aimed at giving a positive jolt to economic activity

24
Q

Hard landing

A

A full scale recession shown by a decline in RNO

25
Q

Hot money

A

Money that flows freely and quickly around the world looking to earn the best rate of return

26
Q

Hysteresis

A

When a sustained increase in the general price level for goods and services

27
Q

IMF (international monetary fund)

A

An organisation of over 180 countries- promoting global monetary cooperation, financial stability, international trade

28
Q

International reserves

A

A nation’s stock of foreign currency and gold

29
Q

Inventories

A

These consist of materials and supplies which are stored for use in production, work in progress, finished goods and good for re-sale

30
Q

Labour shedding

A

Cut backs in employment often seen in a slowdown or a recession

31
Q

Lagging indicators

A

Indicators which tend to follow economic cycles e.g. unemployment

32
Q

Leading indicators

A

Indicators which predict future economic trends e.g. consumer confidence

33
Q

Leveraging

A

The use of borrowed funds to increase your capacity to spend or invest

34
Q

Liquidity trap

A

When very low interest rates cease to have a strong effect on AD

35
Q

Propensity to consume

A

The proportion of any change in income that is spent rather than saved

36
Q

Propensity to consume

A

The change in total saving as a result of a change in income

37
Q

Marginal rate of tax

A

The rate of tax on the next unit (£1) of income earned

38
Q

Monetary Policy Committee (MPC)

A

Bank of England committee of 9 people meets every month to set interest rates

39
Q

NAFTA

A

North American Free Trade Agreement singed in 1994 involving US, Canada and Mexico

40
Q

Nominal GDP

A

Monetary value of all goods and services produced expressed at current prices

41
Q

Nominal wage

A

The annual growth of wages adjusted for inflation

42
Q

Non-inflationary growth

A

Sustained growth of RNO whilst maintaining price stability

43
Q

Risk adverse

A

Exhibiting a dislike of uncertainty, often seen in a recession

44
Q

Stagflation

A

A combination of slow growth and rising inflation

45
Q

Structural budget deficit

A

The size of a fiscal (budget) deficit adjusted to take account of the effects of changes in the economic cycle

46
Q

Tight labour market

A

When demand for labour is high and there are shortages of labour

47
Q

Transmission mechanism

A

How a change in interest rates affects the various sectors of the economy

48
Q

Wage price spiral

A

Where workers bid for higher wages because they have seen their real income eroded by rising prices (lead to further burst of cost push inflation)

Economics REVISION 2 (Macro) (37 decks)

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