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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
Q

Interest rates

A

the cost of borrowing (investing) and reward for saving money; the price of money

26
Q

AS (Aggregate Supply)

A

the total supply of all firms in a macro-economy during a period of time.

27
Q

LRAS (Long Run Aggregate Supply)

A

the new classical equilibrium in that is independent of the price level (i.e. vertical) and set by equilibrium in the labour market.

28
Q

Full employment

A

when unemployment is at its natural level (equilibrium), when everyone who wants a job has a job

29
Q

Inflationary gap

A

when AD is to the right of the LRAS, there is inflationary pressure on prices

30
Q

Deflationary gap

A

when AD is to the left of the LRAS, there is a recession.

31
Q

Recession

A

when GDP has fallen for at least six months

32
Q

Unemployment rate

A

the percentage of the labour force that is unemployed.

33
Q

Labour force

A

the population between 16 and 65 that is willing to work at the going real wage.

34
Q

Underemployment

A

when someone is part-time employed and wants full-time employment or someone with an MA is working at McDonalds.

35
Q

Structural unemployment

A

when the unemployed persons skills are no longer needed so they are unemployed e.g. a paperworker in Kainuu

36
Q

Seasonal unemployment

A

when someone is unemployed during one season of the year e.g. ski-instructors in summer.

37
Q

Frictional unemployment

A

when someone is in-between jobs.

38
Q

Cyclical/demand-deficient unemployment

A

unemployment that occurs during a recession as a result of a fall in AD.

39
Q

Real wage (classical) unemployment

A

when the real wage is too high and so unemployment results.

40
Q

Inflation

A

a sustained increase in the average price level over a period of time.

41
Q

Dis-inflation

A

a fall in the level of inflation

42
Q

Deflation

A

a sustained reduction in the average price level over a period of time.

43
Q

Cost-push inflation

A

inflation that results from a shift in AS to the left, increasing costs of production.

44
Q

Demand-pull inflation

A

inflation that results from a shift in AD to the right, often because of an increase in the money supply.

45
Q

Hyper-inflation

A

a very high level of inflation in the hundreds if not thousands of percent

46
Q

Distribution of income

A

the difference between the rich and poor in a macro-economy

47
Q

Gini coefficient (index)

A

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
Q

Direct taxation

A

tax on income.

49
Q

Indirect taxation

A

tax on goods and services.

50
Q

Indirect taxation

A

tax on goods and services.

51
Q

Progressive tax

A

income tax where the percentage of tax increases with the level of income.

52
Q

Proportional tax

A

income tax where the percentage of tax stays constant regardless of the level of income.

53
Q

Regressive tax

A

income tax where the percentage of tax decreases as the level of income increases.

54
Q

Transfer payments

A

payments made by the government to supplement income e.g. unemployment benefit, pensions, social security etc.

55
Q

Demand-side policy

A

policies aimed at shifting AD e.g. fiscal or monetary policy.

56
Q

Fiscal policy

A

government policy concerning taxation and government spending.

57
Q

Crowding out

A

when government borrowing reduces private investment by taking from the same supply of savings.

58
Q

Monetary policy

A

the control of AD via the interest rate by the adjustment of the money supply by the central bank.

59
Q

Market-based (incentive-based) supply-side policy

A

policies aimed at shifting AS by making the market work more efficiently (ignoring externalities).

60
Q

Interventionist supply-side policy

A

when government spending shifts AS by educating/training labour or investing in infrastructure.

IB Economics HL (3 decks)

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