Macro 1 Flashcards
Accelerator effect
The relationship between the change in new investment and the rate of change of national income
AD
Total planned expenditure in the economy C I G X-m
AS
The total value / amount of g and s supplied in an economy
Balance of payments
A record of a country’s international transactions over a year
Balance of trade
Visible exports minus visible imports
Balanced budget
Where government receipts equal government spending in a fiscal year
Bank rate
The IR set by the BoE
Bond
A method used by the government to finance. Budget deficit, issued in return for money and interest
Boom
Period of above average short run economic growth
Broad money
Money held on banks and building societies that is not immediately accessible
Budget deficit
Where gov spending exceeds gov receipts in a fiscal year
Budget surplus
Where gov receipts exceed gov spending a fiscal year
Central bank
The financial institution typically responsible for setting short term interest rates and issuing notes and coins
Circular flow of income
Model explaining the equilibrium level of national income
Claimant count
A measure of unemployment- the number claiming unemployment benefits
Consumption
Spending by domestic households on g and s
Cost push inflation
Where increases cost of production result in firms increasing there prices , leading to an increase in the general price level
CPI
Consumer price index - target measure for inflation by the MPC of the BoE
Credit crunch
When borrowing becomes more expensive or unavailable
Current account
Part of the BoP which looks at the net income flows earned through either trade in G and S or the reward from investments located overseas
Current account deficit
Where the flows of money from trade and other incomes out of the country are greater than the equivalent flows into the country
Cyclical unemployment
Demand deficient unemployment that results from a downturn in the economic cycle
Deflation
A situation where the general price level falls
Deindustrialision
A fall in the proportion of national output acccountdd for by the manufacturing sector of the economy
Demand management
Using monetary and fiscal policy to control AD to minimise fluctuations in the economic cycle
Demand pull inflation
Where AD exceeds AS leading to an invrease in the price level
Demand side shock
Unexpected and significant changes in the level of AD
Deregulation
The process of removing gov controls from markets
Direct tax
One that cannot be passed on to another person and is usually levied on incomes
Disinflation
Where the rate of inflation is falling but still positive
Discretionary fiscal policy
The deliberate manipulation of gov spending and taxation to influence the economy
Disposable income
Income available to households after the payment of income tax and national insurance contributions
Downtown
Period of the economic cycle where short run economic growth falls from above average to below average
Economic cycle
The tendency for economic growth to fluctuate over time
Economic shock
Sudden, unexpected events that will affect the macroeconomy in a significant way
Exchange rate
The price of one currency expressed in terms of another
Exports
G or s sold abroad
Fiscal policy
Control of the economy via the use of taxation and gov spending
Frictional unemployment
People between jobs
Full employment
The level of employment where all those economically active are able to find work at the going wage rate
GDP
Gross domestic product- the total value of g and s produced in the economy
Globalisation
The ability to produce goods anywhere in the world and sell them in any country
Gov expenditure
Spending by the gov on current and capital items , at both local and national level
Hot money
Money that is liable to rapid transfer from one country to another
Human capital
The skills , abilities, knowledge and motivation of labour
Imports
Purchase of g and s from abroad
Income
A flow of income to a factor of production over a period of time e.g. Salary
Index number
A number designed to be used to show the percentage changes in a variable over time , where 100 is the value in the base period
Inflation
A persistent increase in the general price level
Injection
Money that originates outside the circular flow of income and so boosts national income
Interest rates
The cost of borrowing, the reward for saving or the opportunity cost of spending
Investment
Spending by firms on new capital equipment
Labour force
Those of working age who are either in work or actively seeking work
Macroeconomic equilibrium
The level of national income where there is no tendency for it to rise and fall
Monetary policy
Controlling the economy via changes in IR and the money suppply
Mortgage
Loan to buy a property
MPC
The monetary policy committee of the BoE who meet monthly to decide whether or not to alter the base rate of interest
Money supply
The total amount of money in an economy
Multiplier effect
Where an increase or decrease in spending leads to a larger then proportional change in national income
Narrow money
Notes , coins and balances available for current transactions
National debt
The stock of all outstanding government debt that has yet to be repaid
National income
The total income generated within an economy over a period of time
Negative equity
Situation where the value of ones house is lower than the outstanding mortgage
Negative output gap
Where the economy is producing less than its trend output
Nominal
Not adjusted for inflation
Output gap
The difference between actual growth and trend growth
Participation rate
Proportion of the country’s working age population that makes up the labour force
Policy conflict
Where attempts to achieve one macro policy involves a trade off with another objective
Positive output gap
When actual GDP exceeds the trend rate of GDP , increasing inflationary pressures
Price level
The average level of prices of a range of g and s at a point in time
Primary income
Flows of income from investments abroad minus flows of income from foreign investments in the U.K.
Privatisation
Sale of government owned assets to the private sector
Progressive tax
Whose on higher incomes pay a higher proportion of their income in tax compared with those on lower incomes
Proportional tax
Where everyone pays the same proportion of their income in tax
Real GDP
Gross domestic product, adjusted for the effects of inflation
Recession
2 or more quarters of negative growth
Recovery
When short run economic growth starts to increase after a recession
Regressive tax
Where those on lower incomes pay a higher proportion of their income in tax compared with those on higher incomes
Structural unemployment
Unemployment caused by a change in demand in an economy
Subsidy
A payment made by government to producers to encourage greater production of a g or s
Supply side improvements
Increases in an economy’s productive capacity arising out of businesses improving the efficiency of markets
Supply side shock
Unexpected and significant changes in the price and / or availability of factors of production
Tariff
A tax on imports
Transmission mechanism
How changes in the rate of interest influence the components of AD
Unemployment
Those of working age who are willing and able to work who do not currently have a job
Unemployment rate
The number of unemployed people expressed as a percentage of the current labour force
Unemployment trap
Where individuals receive more in benefit payments than they would in income in employment
Wealth
A stock of owned assets e.g. Housing property , shares
Wealth effect
Where a rise in the value of household wealth encourages consumers to spend more and save less
Withdrawals
Money taken out of the circular flow of income, which reduces national income
