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IB Economics HL > Macro > Flashcards

Macro Flashcards

1
Q

Macro-economy

A

the study of a whole country’s economy rather than a single market.

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2
Q

Closed economy

A

a macro-economy that has no international trade (imports or exports) a theoretical concept.

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3
Q

Open economy

A

a macro-economy that has international trade (imports or exports).

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4
Q

Circular flow of income

A

the flow of money ((or goods, services and factors of production) between firms and households.

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5
Q

Leakages (withdrawals)

A

amounts of money that leave the circular flow: savings, taxation and imports.

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6
Q

Injections

A

amounts of money that enter the circular flow (investment, government spending and exports)

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7
Q

Wealth

A

the value of all goods, land and capital owned by an individual or firm

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8
Q

National income

A

the total value of income received in a macro-economy during a period of time, usually one year.

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9
Q

GDP (Gross Domestic Product)

A

the value of total production in a macro- economy produced during a period of time, usually one year.

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10
Q

Net (property) income from abroad

A

the income (usually profits) that is sent or received from abroad; the difference between GDP and GNI

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11
Q

GNI (Gross National Income)

A

the value of total income received in a macro- economy during a period of time, usually one year.

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12
Q

Real GDP

A

the value of total production in a macro-economy produced during a period of time taking into account inflation, usually one year.

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13
Q

Nominal GDP

A

the value of total production in a macro-economy produced during a period of time measured at current prices, usually one year.

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14
Q

GDP per capita

A

the value of total production in a macro-economy produced during a period of time divided by the population, usually one year.

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15
Q

Green GDP

A

measure of GDP that takes into account loss of bio-diversity, carbon footprint and other negatives externalities.

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16
Q

Economic growth

A

an increase in the value or quantity of total production during a period of time.

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17
Q

Business cycle

A

the cycle of growth and recession (and growth and recession) that a macro-economy goes through over a period of time (decades).

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18
Q

AD (aggregate Demand)

A

the total demand in a macro-economy during a period of time; AD = C+I+G+(X-M)

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19
Q

Consumption

A

the value of all goods and services bought in a macro-economy during a period of time.

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20
Q

Investment

A

the value of spending on capital or spending financed by borrowing in a macro-economy during a period of time.

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21
Q

Government spending

A

the government spending on public goods, transfer payments etc.

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22
Q

Imports

A

goods, services and investment flowing into a macro-economy during a period of time.

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23
Q

Exports

A

goods, services and investment flowing out of a macro-economy during a period of time.

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24
Q

Net exports

A

exports minus imports

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25
Interest rates
the cost of borrowing (investing) and reward for saving money; the price of money
26
AS (Aggregate Supply)
the total supply of all firms in a macro-economy during a period of time.
27
LRAS (Long Run Aggregate Supply)
the new classical equilibrium in that is independent of the price level (i.e. vertical) and set by equilibrium in the labour market.
28
Full employment
when unemployment is at its natural level (equilibrium), when everyone who wants a job has a job
29
Inflationary gap
when AD is to the right of the LRAS, there is inflationary pressure on prices
30
Deflationary gap
when AD is to the left of the LRAS, there is a recession.
31
Recession
when GDP has fallen for at least six months
32
Unemployment rate
the percentage of the labour force that is unemployed.
33
Labour force
the population between 16 and 65 that is willing to work at the going real wage.
34
Underemployment
when someone is part-time employed and wants full-time employment or someone with an MA is working at McDonalds.
35
Structural unemployment
when the unemployed persons skills are no longer needed so they are unemployed e.g. a paperworker in Kainuu
36
Seasonal unemployment
when someone is unemployed during one season of the year e.g. ski-instructors in summer.
37
Frictional unemployment
when someone is in-between jobs.
38
Cyclical/demand-deficient unemployment
unemployment that occurs during a recession as a result of a fall in AD.
39
Real wage (classical) unemployment
when the real wage is too high and so unemployment results.
40
Inflation
a sustained increase in the average price level over a period of time.
41
Dis-inflation
a fall in the level of inflation
42
Deflation
a sustained reduction in the average price level over a period of time.
43
Cost-push inflation
inflation that results from a shift in AS to the left, increasing costs of production.
44
Demand-pull inflation
inflation that results from a shift in AD to the right, often because of an increase in the money supply.
45
Hyper-inflation
a very high level of inflation in the hundreds if not thousands of percent
46
Distribution of income
the difference between the rich and poor in a macro-economy
47
Gini coefficient (index)
a measure of income distribution; nearer it is to 1 (or 100) the wider the distribution of income (greater difference between rich and poor)
48
Direct taxation
tax on income.
49
Indirect taxation
tax on goods and services.
50
Indirect taxation
tax on goods and services.
51
Progressive tax
income tax where the percentage of tax increases with the level of income.
52
Proportional tax
income tax where the percentage of tax stays constant regardless of the level of income.
53
Regressive tax
income tax where the percentage of tax decreases as the level of income increases.
54
Transfer payments
payments made by the government to supplement income e.g. unemployment benefit, pensions, social security etc.
55
Demand-side policy
policies aimed at shifting AD e.g. fiscal or monetary policy.
56
Fiscal policy
government policy concerning taxation and government spending.
57
Crowding out
when government borrowing reduces private investment by taking from the same supply of savings.
58
Monetary policy
the control of AD via the interest rate by the adjustment of the money supply by the central bank.
59
Market-based (incentive-based) supply-side policy
policies aimed at shifting AS by making the market work more efficiently (ignoring externalities).
60
Interventionist supply-side policy
when government spending shifts AS by educating/training labour or investing in infrastructure.

IB Economics HL (3 decks)

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