Key Words

Question 1

Absolute advantage

Answer 1

a country has an absolute advantage if it can record of all the currency flows into and out
of a country in a particular time

Question 2

Accelerator

Answer 2

a change in the level of investment in new capital goods induced by a change in national income or output. The size of the accelerator depends on the economy’s capital-output ratio.

Question 3

Actual output

Answer 3

level of real output produced in the economy in a particular year - not to be confused with the trend level of output, which is what the economy is capable of producing when working at full capacity. Actual output differs from the trend level of output when there are output gaps;

Question 4

AD

Answer 4

total planned spending on real output in the economy at different price levels.

Question 5

AS

Answer 5

the level of real national output that producers are prepared to supply at different average price levels.

Question 6

Aid

Answer 6

money, goods and services, and
‘soft loans given by the government of one country or a multilateral institution such as the World Bank to help another country. Non-government organisations (NGOs) such as Oxfam also provide aid.

Question 7

Assets

Answer 7

a resource (physical or otherwise) that can be sold for money.

Question 8

Automatic stabilisers

Answer 8

fiscal policy instruments (e.g. progressive taxes and income-related welfare benefits) that automatically stimulate aggregate demand in an economic downswing and depress aggregate demand in an upswing, thereby ‘smoothing’ the economic cycle,

Question 9

Availability of credit

Answer 9

funds available for households and firms to borrow,

Question 10

balance of payments

Answer 10

a record of all the currency flows into and out of a country in a particular time period.

Question 11

Balance of payments equilibrium

Answer 11

a situation in which a deficit or surplus on the current account of the balance of payments is exactly matched by capital inflows or outflows in the other parts of the balance of payments.

Question 12

Balance of Primary income

Answer 12

comprises inward income flowing into the economy in the current year, generated by UK-owned capital assets located overseas le.g. shares owned in foreign companies, or land owned overseas, and outward flows of income from the economy in the current year, generated by overseas-owned capital assets located in the UK.

Question 13

Balance of secondary income

Answer 13

current transfers leg. gifts of money, international aid and transfers between the UK and the EU], flowing into or out of the UK economy in a particular year.

Question 14

Balance of trade

Answer 14

the difference between the money value of a country’s imports and its exports. Balance of trade is the largest component of a country’s balance of payments on current account.

Question 15

balance of trade deficit

Answer 15

when the money value of a country’s imports exceeds the money value of its exports.

Question 16

Balance of trade in goods

Answer 16

the part of the current account measuring payments for exports and imports of goods. The difference between the total value of exports and the total value of imports is sometimes called the ‘balance of visible trade’

Question 17

Balance of trade in services

Answer 17

part of the current account, the difference between the payments for the exports of services and the payments for the imports of services,

Question 18

Balance of trade surplus

Answer 18

when the money value of a country’s exports exceeds the money value of its imports

Question 19

Balanced budget

Answer 19

achieved when government spending equals
government revenue (G = TI.

Question 20

Bank rate

Answer 20

the rate of interest that the Bank of England pays to commercial banks on their deposits held at the Bank of England lit is also referred to as the base ratel

Question 21

bonds

Answer 21

financial securities sold by companies (corporate bonds) or by governments (government bonds] which are a form of long-term borrowing. Bonds usually have a maturity date on which they are redeemed, with the borrower usually making a fixed interest payment each year until the bond matures).

Question 22

broad money

Answer 22

the part of the stock of money (or money supply| made up of cash, other liquid assets such as bank and building society deposits, but also some illiquid assets. The measure of broad money used by the Bank of England is called M4.

Question 23

budget deficit

Answer 23

occurs when government spending exceeds government revenue (G > T).

Question 24

budget surplus

Answer 24

occurs when government spending is less than government revenue (G < T).

Question 25

capital gain

Answer 25

the profit made on the buying and selling of financial and other assets (capital losses are the losses made in buying and selling assets).

Question 26

capital markets

Answer 26

where securities such as shares and bonds are issued to raise medium- to long-term financing, and are traded on the ‘second-hand part of the market le.g. the London Stock Exchange and the New York Stock Exchange),

Question 27

capital ratio

Answer 27

the amount of capital on a bank’s balance sheet as a proportion of its loans.

Question 28

central bank

Answer 28

a national bank that provides financial and banking services for its country’s government and banking system, as well as implementing the government’s monetary policy and issuing currency. The Bank of England is the UK’s central bank.
The European Central Bank (ECB) implements monetary policy for countries using the euro as their official national currency.

Question 29

claimant count

Answer 29

the method of measuring unemployment according to those people who are claiming unemployment-related benefits (Jobseeker’s Allowance).

Question 30

closed economy

Answer 30

an economy with no international trade.

Question 31

commercial bank (high street bank and retail bank)

Answer 31

or high street bank) a financial institution which aims to make profits by selling banking services to its customers.

Question 32

Commercial bills

Answer 32

short-dated debt (usually three months to maturity)
issued by private businesses, which pays the holder a fixed rate of interest.

Question 33

Comparative advantage

Answer 33

this is measured in terms of opportunity cost: the country with the least opportunity cost when producing a good possesses a comparative advantage in that good.

Question 34

consumer price index

Answer 34

the official measure used to calculate the rate of consumer price inflation in the UK. It calculates the average price increase of a basket of 700 different consumer goods and services.

Question 35

consumption

Answer 35

total planned spending by households on consumer goods and services produced within the economy,

Question 36

contractionary fiscal policy

Answer 36

uses fiscal policy to decrease aggregate demand and to shift the AD curve to the left.

Question 37

contractionary monetary policy

Answer 37

uses higher interest rates to decrease aggregate demand and to shift the AD curve to the left.

Question 38

corporate bonds

Answer 38

debt security issued by a company and sold as new issues to people who lend long term to the company. They can usually be resold second hand on a stock exchange.

Question 39

corruption

Answer 39

a barrier holding back economic growth and development, especially in less developed economies.

Question 40

cost push inflation

Answer 40

(also known as cost inflation) a rising price level caused by an increase in the costs of production, shown by a shift of the SRAS (or Keynesian AS) curve to the left.

Question 41

coupon

Answer 41

the guaranteed fixed annual interest payment, often divided into two six-month payments, paid by the issuer of a bond to the owner of the bond.

Question 42

credit

Answer 42

when a bank makes a loan, it creates credit. The loan results in the creation of an advance, which is an asset on the bank’s balance sheet, and a deposit, which is a liability of the bank.

Question 43

credit crunch

Answer 43

occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to obtain finance and leading to a rise in the cost of borrowing.

Question 44

crowding out

Answer 44

a situation in which an increase in government or public-sector spending displaces private-sector spending, with little or no increase in aggregate demand,

Question 45

Currency union

Answer 45

an agreement between a group of countries to share a common currency, and usually to have a single monetary and foreign exchange rate policy.

Question 46

Current account deficit

Answer 46

when currency outflows in the current account exceed the currency inflows.

Question 47

Current account

Answer 47

measures all the currency flows into and out of a country in a particular time period in payment for exports and imports of goods and services, together with primary and secondary income flows (previously known as ‘income flows and transfers’).

Question 48

Current account surplus

Answer 48

when currency inflows in the current account exceed the currency outflows.

Question 49

Customs unions

Answer 49

trading blocs in which member countries enjoy internal free trade in goods and possibly services, with all the member countries protected by a common external tariff barrier.

Question 50

cyclical budget deficit

Answer 50

the part of the budget deficit which rises in the downswing of the economic cycle and falls in the upswing of the cycle.

Question 51

Cyclical U/P

Answer 51

(also known as Keynesian unemployment and demand-deficient unemployment)
unemployment caused by a lack of aggregate demand in the economy, occurring when the economy goes into a recession or depression.

Question 52

dept

Answer 52

people’s financial liabilities, or money that they owe.

Question 53

Deficit financing

Answer 53

deliberately running a budget deficit and then borrowing to finance the deficit.

Question 54

Deflation

Answer 54

a continuing tendency for the average price level to fall.

Question 55

demand side

Answer 55

relates to the impact of changes in aggregate demand on the economy; associated with Keynesian economics.

Question 56

demand pull inflation

Answer 56

(also known as demand inflation) a rising price level caused by an increase in aggregate demand, shown by a shift of the AD curve to the right.

Question 57

demand side fiscal policy

Answer 57

used to increase or decrease the level of aggregate demand land to shift the AD curve right or left] through changes in government spending, taxation and the budget balance.

Question 58

deregulation

Answer 58

involves removing previously imposed regulations. It is the opposite of regulation.

Question 59

direct tax

Answer 59

a tax that cannot be shifted by the person legally liable to pay the tax onto someone else.
Direct taxes are levied on income and wealth.

Question 60

discretionary fiscal policy

Answer 60

involves making discrete (separate) changes to G, T and the budget deficit to manage the level of aggregate demand.

Question 61

distribution of income

Answer 61

the spread of different incomes among individuals and different income groups in the economy.

Question 62

Disinflation

Answer 62

when the rate of inflation is falling, but still positive.

Question 63

economic cycle

Answer 63

(also known as a business cycle or trade cycle) upswing and downswing in aggregate economic activity taking place over 4 to 12 years.

Question 64

economic shocks

Answer 64

an unexpected event hitting the economy.
Economic shocks can be demand-side or supply-side shocks land sometimes both and unfavourable or favourable.

Question 65

education and training

Answer 65

education develops individual knowledge and intellect, while training develops work skills. Both are necessary for economic growth and development.

Question 66

equilibrium national income

Answer 66

the level of income at which withdrawals from the circular flow of income equal injections into the flow; also the level of output at which aggregate demand equals aggregate supply.

Question 67

equilibrium unemployment

Answer 67

exists when the economy’s aggregate labour market is in equilibrium. It is the same as the natural level of unemployment.

Question 68

equity

Answer 68

the assets that people own.

Question 69

EU

Answer 69

an economic and partially political union established in 1993. It developed as a more closely integrated organisation from the European
Economic Community (EEC), originally formed in 1957. The EU has expanded to include (after the UK’s departure) 27 countries.

Question 70

eurozone

Answer 70

(also known as the euro area) the name used for the group of EU countries that have replaced their national currencies with the euro. As of 2022, 19 of the
27 EU members have replaced their national currencies with the euro.

Question 71

exchange rate

Answer 71

the external price of a currency, usually measured against another currency.

Question 72

expansionary of fiscal policy

Answer 72

uses fiscal policy to increase aggregate demand and to shift the AD curve to the right.

Question 73

expansionary monetary policy

Answer 73

uses lower interest rates to increase aggregate demand and to shift the AD curve to the right.

Question 74

expenditure reducing policy

Answer 74

a government policy which aims to eliminate a current account deficit by reducing the demand for imports, by reducing the level of aggregate demand in the economy. Conversely, to reduce a current account surplus, aggregate demand would be increased and spending on imports would rise.

Question 75

expenditure switching policy

Answer 75

a government policy which aims to reduce a current account deficit by switching domestic demand away from imports to domestically produced goods. Conversely, to reduce a current account surplus, the policy would aim to switch domestic demand away from domestically produced goods towards imports.

Question 76

export subsidies

Answer 76

money given to domestic firms by the government to encourage firms to sell their products abroad and to help make their goods cheaper in export markets.

Question 77

export led growth

Answer 77

in the short run, economic growth resulting from an increase in exports, which is one of the components of aggregate demand; in the long run, economic growth resulting from the growth and increased international competitiveness of exporting industries.

Question 78

exports

Answer 78

domestically produced goods or services sold to residents of other countries.

Question 79

financial account

Answer 79

the part of the balance of payments which records capital flows into and out of the economy.

Question 80

financial conduct authority

Answer 80

aims to make sure that financial markets work well so that consumers get a fair deal, by ensuring that the financial industry is run with integrity and that consumers can trust that firms have their best interests at heart, and by providing consumers with appropriate financial products and services.

Question 81

financial markets

Answer 81

markets in which financial assets or securities are traded.

Question 82

Financial policy committee

Answer 82

the part of the Bank of England charged with the primary objective of identifying, monitoring and taking action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system. The committee’s secondary objective is to support the economic policy of the government.

Question 83

fiscal policy

Answer 83

the use by the government of government spending and taxation to try to achieve the government’s policy objectives.

Question 84

fixed exchange rate

Answer 84

an exchange rate fixed at a certain value and maintained at this value by the central bank’s intervention in the foreign exchange market.

Question 85

FDI

Answer 85

investment in capital assets (e.g. manufacturing and service industry capacityl in a foreign country by a business with headquarters in another country.
Very often the overseas company establishes subsidiary companies in the countries in which it is investing.

Question 86

foreign exchange markets

Answer 86

(also known as forex, FX or currency markets) global, decentralised markets for the trading of currencies

Question 87

forward guidance

Answer 87

attempts to Send signals to financial markets, businesses and individuals, about the Bank of England’s interest rate policy in the months and is ahead, so that economic agents are not surprised by a sudden and unexpected change in
policy,

Question 88

free trade area

Answer 88

in a free trade area member countries abolish larills an mutual trade, but each partner determines its own lacills on trade with non-member
countries

Question 89

freely floating exchange rate

Answer 89

the exchange rate is determined solely by the interplay of demand for, and supply of, the currency.

Question 90

frictional UP

Answer 90

also known as transitional unemployment) unemployment that is usually short term and occurs when a worker switches between jobs.

Question 91

full employment

Answer 91

according to Beveridge’s definition, full employment means 3% or less of the labour force unemployed.
According to the free-market definition, it is the level of employment at the market-clearing real-wage rate, where the number of workers whom employers wish to hire equals the number of workers wanting to work.

Question 92

full employment income

Answer 92

the level of income when the economy is producing on its production possibility frontier, with no spare capacity.

Question 93

globalisation

Answer 93

the process of increasing economic integration of the world’s economies.

Question 94

government bonds q

Answer 94

debt security, in the UK known as gilt-edged securities or gilts, issued by a government and sold as new issues to people who lend long term to the government, They can be resold second hand on a stock exchange.

Question 95

GDP

Answer 95

the sum of all goods and services, or level of output, produced in the economy over a period of time, e,g. one year.

Question 96

hidden economy

Answer 96

also known as the informal economy, the underground economy and the black economy] all the economic transactions conducted in cash which are not recorded in the national income figures because ol tax evasion.

Question 97

Human capital

Answer 97

the skills, knowledge and experience possessed by the population.

Question 98

imports

Answer 98

goods or services produced in other countries and sold to residents of this country,

Question 99

index number

Answer 99

a number used in an index (e.g. the consumer prices index] to enable accurate comparisons over time to be made.

Question 100

indexation

Answer 100

the automatic adjustment of items such as pensions and welfare benefits to changes in the price level, through the use of a price index.

Question 101

indicators of development

Answer 101

these include gross domestic product
(GDP) per head, information on the distribution of income, mortality rates and health statistics.

Question 102

indirect tax

Answer 102

a tax that can be shifted by the person legally liable to pay the tax onto someone else le.g. through raising the price of a good being sold by the taxpayer).
Indirect taxes are levied on spending.

Question 103

inflation

Answer 103

a persistent or continuing rise in the average price level,

Question 104

infrastructure

Answer 104

for the most part, the result of past investment in buildings. roads, bridges, power supplies, fast broadband and other fixed capital goods that are needed for the economy to operate efficiently.

Question 105

injection

Answer 105

spending entering the circular flow of income as a result of investment, government spending and exports.

Question 106

institutional factors

Answer 106

examples include rules, laws, constitutions, the financial system and defined property rights.

Question 107

interventionist policies

Answer 107

occur when the government intervenes in, and sometimes replaces, free markets. Interventionist supply-side policies include government funding of research and development

Question 108

investment

Answer 108

total planned spending by lirms on capital goods produced within the economy

Question 109

investment bank

Answer 109

a bank which does not generally accept deposits from ordinary members of the general public. Traditional investment banking refers to financial advisory work, such as advising private companies on how to become public companies by floating on the stock market making shares available for the public to buy or sell), or advising public companies on how to buy up other companies. Investment banks also deal directly in financial markets for their own account.

Question 110

involuntary unemployment

Answer 110

occurs when workers are willing to work at current market wage rates but there are no jobs available.

Question 111

Kenyan economics

Answer 111

followers of the economist John Maynard Keynes, who generally believe that governments should manage the economy, particularly through the use of fiscal policy.

Question 112

labour force survey

Answer 112

a quarterly sample survey of households in the UK. Its purpose is to provide information on the UK labour market. The survey seeks information on respondents* personal circumstances and their labour market status during a period of one to four weeks.

Question 113

LDC

Answer 113

countries considered behind in terms of their economy, human capital, infrastructure and industrial base.

Question 114

liability

Answer 114

an amount owed by a business - either a current lahort-term) or non-current long-term) liability

Question 115

life cycle theory of consumption

Answer 115

theory that explains
Consumption and saving in lerms of how people expect their intomes to change over the whole
of their life cycles.

Question 116

liquidity

Answer 116

measures the ease with Which an assel can be converted into cash without loss of value.
Cash is the most liquid of all assets.

Question 117

liquidity ratio

Answer 117

the ratio of a bank’s cash and other liquid assets to its deposits.

Question 118

long run AS

Answer 118

the real output that can be supplied when the economy is on its production possibility frontier.
This is when all the available factors of production are employed and producing at their normal capacity level of output.

Question 119

long run economic growth

Answer 119

an increase in the economy’s potential level of real output, and an outward movement of the economy’s production possibility frontier.

Question 120

macroeconomic indicators

Answer 120

provide information from recent economic performance for judging the success or failure of a particular type of government policy le.g, fiscal policy or monetary policyl.

Question 121

managed exchange rate

Answer 121

where the government intervenes in the foreign exchange market to influence its value.

Question 122

marginal propensity to consume

Answer 122

the fraction of any increase in income which people plan to spend on the consumption of domestically produced goods and services.

Question 123

Marginal propensity to save

Answer 123

fraction of any increase in income which people plan to save rather than spend.

Question 124

Market based supply side policies

Answer 124

for non-interventionist supply-side policies) these policies free up markets, promote competition and greater efficiency, and reduce the economic role of the state.

Question 125

Marketisation

Answer 125

laiso known as commercialisation) involves shifting provision of goods or services from the non-market sector to the market sector.

Question 126

maturity date

Answer 126

the date on which the issuer of a dated security, such as a gilt-edged security (long-dated) or a Treasury bill (short-dated), pays the face value of the security to the security’s owner.

Question 127

monetarism

Answer 127

narrow monetarism centres on increases in the money supply as the prime cause of inflation; broader monetarism focuses on the virtues of iree markets in resource allocation.

Question 128

monertists

Answer 128

economists who argue that a prior increase in the money supply is the cause of inflation.

Question 129

monetary policy

Answer 129

the use by the government and its agent, the Bank of England, of interest rates and other monetary instruments to try to achieve the government’s policy objectives.

Question 130

Monetary policy committee

Answer 130

a group of Bank of England officials and independent experts who meet to set interest rates in the
UK eight times a year.v

Question 131

monetary policy instruments

Answer 131

tools such as Bank Rate which are used to try to achieve monetary policy objectives.

Question 132

money

Answer 132

primarily a medium of exchange or means of payment, but also a store of value.

Question 133

money market

Answer 133

provide a means for lenders and borrowers to satisfy their short-term financial needs. The term ‘money market covers several markets, including those for Treasury bills and commercial bills.

Question 134

money supply

Answer 134

the stock of financial assets which function as money.

Question 135

moral hazard

Answer 135

the tendency of individuals and firms, once protected against some contingency, to behave so as to make that contingency more likety.

Question 136

More developed countries

Answer 136

countries with a high degree of economic development, high average income per head, high standards of living, usually service industries dominating manufacturing, and investment having taken place over many years in human capital and infrastructure.

Question 137

multinational corporations

Answer 137

enterprises operating in several countries but with their headquarters in one country.

Question 138

multiplier

Answer 138

the relationship between a change in aggregate demand and the resulting generally larger change in national income,

Question 139

narrow money

Answer 139

the part of the stock of money (or money supply) made up of cash and liguid bank and building society deposits.

Question 140

national capital stock

Answer 140

the stock of capital goods leg. buildings and machinery] in the economy that has accumulated over time and is measured at a point in time

Question 141

national dept

Answer 141

the stock of all past government borrowing that has not been paid back.

Question 142

national income

Answer 142

the flow of new output produced by the economy in a particular period (e.g. a year). measured by the flow of factor incomes.

Question 143

national product

Answer 143

lalso known as national outputi the flow of new output produced by different industries in a particular period le.a, a vaari.

Question 144

national wealth

Answer 144

the stock of all goods that exist at a point in time that have value in the economy.

Question 145

nautural rate of unemployment

Answer 145

the rate of unemployment when the aggregate labour market is in equilibrium.

Question 146

negative output gap

Answer 146

the level of actual real outout in the econorny is lower than the trend outbut level.

Question 147

nominal GDP

Answer 147

GDP measured at the current market prices, without removing the effects of inflation.

Question 148

normal capacity level of output

Answer 148

the level of output at which the full production potential of the economy is being used.

Question 149

office of budget responsibility

Answer 149

advisory public body that provides independent economic forecasts and analysis of the public finances as background to the preparation of the UK budget.

Question 150

open economy

Answer 150

an economy open to international trade.

Question 151

output gaps

Answer 151

show the levet of actual real output in the economy either higher or lower than the trend output level.

Question 152

phillips curve

Answer 152

based on evidence from the economy, this shows the apparent relationship between the rate of inflation and the rate of unemployment; now known as the short-run Phillips curve.

Question 153

policy conflict

Answer 153

when two policy objectives cannot both be achieved at the same time: the better the performance in achieving one objective, the worse the performance in achieving the other.

Question 154

policy objective

Answer 154

a target or goal that policy-makers aim to ‘hit.

Question 155

portfolio investment

Answer 155

the purchase of one country’s securities (e.g. bonds and shares) by the residents or financial institutions of another country.

Question 156

positive output gaps

Answer 156

the level of actual real output in the economy is greater than the trend output level.

Question 157

price index

Answer 157

an index number showing the extent to which a price, or a ‘baskel’ of prices, has changed over a month, quarter or year in comparison with the pricels) in a base year.

Question 158

principle of taxation

Answer 158

also known as a canon of taxation) a criterion used for judging whether a tax is good or bad,

Question 159

privatisation

Answer 159

involves shifting ownership of state-owned assets to the private sector.

Question 160

profitability

Answer 160

the state or condition of yielding a financial profit of gain.

Question 161

pro free market economists

Answer 161

opponents of Keynesian economists, who dislike government intervention in the economy and who much prefer the operation of free markets.

Question 162

proportional taxation

Answer 162

when the proportion of income paid in tax stays the same as income increases.

Question 163

prudent regulation authority

Answer 163

the part of the Bank of England responsible for the microprudential regulation and supervision of banks. building societies, insurers and major investment firms.

Question 164

purchasing power parity

Answer 164

the rates of currency conversion that equalise the purchasing power of different currencies by eliminating the differences in price levels between countries.

Question 165

quantative easing

Answer 165

when the Bank of England buys assets, usually government bonds, with money that the Bank has created electronically.

Question 166

quantity theory of money

Answer 166

the oldest theory of inflation, which states that inflation is caused by a persistent increase in the supply of money.

Question 167

quotas

Answer 167

physical limits on the quantities of imported goods allowed into a country.

Question 168

rate of interest

Answer 168

the reward for lending savings to somebody else leg. a bankl and the cost of borrowing

Question 169

real GDP

Answer 169

a measure of all the goods and services produced in an economy, adjusted for price changes or inflation. The adjustment transforms changes in nominal GDP, which is measured in money terms, into a measure that reflects changes in the total output of the economy.

Question 170

real wages

Answer 170

the purchasing power of the nominal (or money] wage; for example, real wages fall when inflation is higher than the rise in the nominal wage rate, and real wages rise when the nominal wage rate increases more rapidly than inflation.

Question 171

real wage up

Answer 171

unemployment caused by real wages being stuck above the equilibrium market-clearing real wage.

Question 172

recession

Answer 172

in the UK and many other countries, a recession is defined as six months or more of negative economic growth or declining real national output.

Question 173

reflationary politcies

Answer 173

policies that increase aggregate demand with the intention of increasing real output and employment.

Question 174

regressive taxation

Answer 174

when the proportion of income paid in tax falls as income increases.

Question 175

retail price index

Answer 175

a measure formerly used to calculate the rate of consumer price inflation in the UK.

Question 176

saving

Answer 176

income which is not spent.

Question 177

seasonal unemployment

Answer 177

unemployment arising in different seasons of the year, caused by factors such as the weather.

Question 178

security

Answer 178

secured loans, such as mortgage loans secured against the value of property, are less fisky for banks than unsecured
loans.

Question 179

shares

Answer 179

undated financial assets, sold initially by a company to raise financial capital. Shares sold by public limited companies (PLCs) are marketable on a stock exchange, but shares sold by private limited companies (Ltds) are not marketable. Unlike a loan, a share signifies that the holder owns part of the enterprise.

Question 180

short run economic growth

Answer 180

growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy.

Question 181

short term speculative capital

Answer 181

hot money

refers to flows of money across international borders, moving to find the greatest short-term return; it is usually very easy to move and will move quickly as returns and opportunities arise.

Question 182

structural budget deficit

Answer 182

the part of the budget deficit which is not affected by the economic cycle but results from structural change in the economy affecting the government’s finances, and also from long-term government policy decisions.

Question 183

structural UP

Answer 183

long-term unemployment occurring when some industries are declining, even though other industries may be growing. It also occurs within a growing industry if automation reduces the demand for labour, and when production requires new skills not possessed by the workers who lose their jobs. Structural unemployment is associated with the occupational and geographical immobility of labour.

Question 184

supply side

Answer 184

relates to changes in the potential output of the economy. which is affected by the available factors of production (e.g. changes in the size of the labour force and the productivity of labour).

Question 185

supply side economics

Answer 185

a branch of free-market economics arguing that government policy should be used to improve the competitiveness and efficiency of markets and, through this, the performance of the economy.

Question 186

supply side fiscal policy

Answer 186

used to increase the economy’s ability to produce and supply goods, through creating incentives to work, save, invest and be entrepreneurial. Interventionist supply-side fiscal policies, such as the financing of retraining schemes for unemployed workers, are also designed to improve supply-side performance.

Question 187

supply side improvements

Answer 187

reforms undertaken by the private sector to increase productivity so as to reduce costs and to become more efficient and competitive.
Supply-side improvement often results from more investment and innovation, often undertaken by firms without prompting from the government.

Question 188

supply side policies

Answer 188

government economic policies which aim to make markets more competitive and efficient, increase production potential and shift the LAS curve to the right. Supply-side fiscal policy is arguably the most important type of supply-side policy, but there are also non-fiscal supply-side policies.

Question 189

systematic risk

Answer 189

in a financial context, the risk of a breakdown of the entire financial system, caused by inter-linkages in the financial system, rather than simply the failure of an individual bank or financial institution.

Question 190

tariffs

Answer 190

(also known as import duties) taxes imposed on imports from other countries entering a country.

Question 191

total managed expenditure

Answer 191

the total amount that the government spends. It splits into the amount that government departments (e.g. Defence) have been allocated to spend and spending that is not controlled by a government department, including welfare, pensions and national debt interest payments.

Question 192

trade off between policy objectives

Answer 192

although it may be impossible to achieve two desirable objectives at the same time le.g. zero inflation and full employment), policy-makers may be able to choose an acceptable combination lying between the extremes, e.g. 2% inflation and 4% unemployment.

Question 193

treasury bills

Answer 193

short-dated government debt usually three months to maturity), which pays the holder a fixed rate of interest until redemption.

Question 194

trend growth rate

Answer 194

the rate at which output can grow, on a sustained basis, without putting upward or downward pressure on inflation. It reflects the annual average percentage increase in the productive capacity of the economy.

Question 195

UN HDI

Answer 195

an index based on life expectancy, education and per capita income indicators, which ranks the world’s countries into four tiers of human development: (il very high human development;
(ill high human development;
(itil medium human development;
(iv) low human development.

Question 196

voluntary unemployment

Answer 196

occurs when workers choose to remain unemployed and refuse job offers at current market wage rates.

Question 197

withdrawal

Answer 197

a leakage of spending power out of the circular flow of income into savings, taxation or imports.

Question 198

WTO

Answer 198

an international body whose purpose is to promote free trade by persuading countries to abolish import tariffs and other barriers to trade. As such, it has become closely associated with globalisation.

Question 199

yield

Answer 199

the annual interest on a bond expressed as a percentage of the bond’s current market price.