Macro Flashcards
Macroeconomics
The study of the whole economy at the aggregate level.
Ceteris paribus
All other factors remaining constant, when examining a part of the economy
Recession
2 periods of consecutive negative economic growth
Depression
A deep recession
Fiscal policy
Use of government spending and taxation to achieve policy objectives
Monetary policy
Use of interest rates to achieve a policy objective
Monetarism
The belief excessive inflation is as a result of growth of the money supply, which monetary policy should control
Supply side economics
Policy aimed at improving the competitiveness and efficiency of markets
Policy instrument
A tool or set of tools used to try and achieve a policy objective
Policy objective
A goal that policy makers aim to hit
Policy conflict
When two policy objectives can’t be met at the same time, better one goes the worse another goes.
Policy trade off
A satisfactory combination of policy objectives used as two policy objectives can’t both be met.
Policy indicator
Provides information about what is happening in the economy
Economic growth
A increase in an economy’s potential level of real output, an outward shift in the PPF.
National income/output
The flow of new output produced in the economy in a partcicular period (a year)
Economic cycle
The fluctuation of real output above and below the trand line of economic growth
Output gap
The difference between actual growth and trend growth
Aggregate demand
The total planned spending on real output in an economy.
Consumption
The total planned spending by households on real output in an economy
Investment
Total planned spending by firms on real output in an economy.
Savings
Income which is not spent
Interest rates
The reward for saving and the cost of borrowing
Wealth
The stock of assets or things that have value, which people own.
Technical progress
The improvement in methods of production, leading to new types and better quality goods.
Accelerator
The change in the level of investment in new capital goods induced by a change in national income. Depends on an economies accelerator and capital-output ratio
Equilibrium national output
The level of national income at which withdrawals equal injections into the circular flow. S=I
Closed economy
A economy with no international trade
Open economy
A economy with imports and exports
Macroeconomic equilibrium
AD=AS or S=I
Aggregate supply
The level of RNO at which producers are prepared to sell at average price levels
Inflation
The persistent and continuing rise of average price level
Reflation
The increased level of real output following an increase in AD
Claimant count
Measuring unemployment based on the number people claiming the claimant count
Labour force survey
A quarterly sample of households providing information on the labour market.
Full employment
Beveridge : 3% or less unemployed. Free market: When the number of people employed are the number of people who want jobs at the current wage rate.
Frictional employment
Voluntary unemployment, when you move from one job to another.
Structural unemployment
Caused by a structural change in industries.
Cyclical unemployment
When a lack of AD leads to unemployment
Seasonal unemployment
Caused by things like the weather and xmas
Deflation
The persistent or continuing fall in the average price level
Demand pull inflation
Inflation caused by an increase in AD
Cost push inflation
Inflation caused by a rise in the cost of the factors of production causing a shrink in AS
Current account
Measures currency imports minus currency exports
Export
A domestically produced good sold to other countries
Import
A good or service produced abroad and sold here
Investment income
The profit and interest income flowing into a country that has been generated from abroad
Transfers
Payments between countries for which there is no service given in return
Balance of trade
Exports-imports
Central bank
Implements monetary policy on behalf of the government
Commercial bank
A bank such as Barclays that aims to make a profit form commercial business
BoE’s interest rate
The rate of interest at which the BoE lends to commercial banks to increase their liquidity
Liquidity
The ease at which assets can be turned into cash quickly at a pre-known rate or price =. Cash is the most liquid of all assets
Mortgage
A long term loan to a house owner that is secured by a property
Lender of the last resort function
The willingness of the BoE to lend to banks to increase liquidity and faith in the banking system
Money supply
The stock of money in the economy
Balance budget
G=T
Budget deficit
G>T
Budget surplus
G<T
Deficit financing
Deliberately running a budget deficit and financing it by borrowing
Demand side fiscal policy
Used to increase or decrease the level of AD
Expansionary fiscal policy
Used to increase the level of AD
Contactionary fiscal policy
Used to decrease the level of AD
Gov spending multiplier
The relationship between Gov spending and change in national income
National income multiplier
The relationship between change in AD and change in national income
Tax multiplier
The relationship between a change in taxation and a change in national income
Crowding out
The situation in which an increase in government spending displaces the private sector with therefore little increase in AD
Discretionary fiscal policy
Making small changes to G and T to fine tune the level of AD
Supply-side fiscal policy
Used to increase an economy’s ability to produce and supply goods.
National debt
The stock of all past government loans that has not been paid back
Progressive tax
Where proportion paid increases as income increases
Supply-side economics
Government policy to improve the competitiveness of markets
Deregulation
Removing of previous regulations
Marketisation
The shift of provision of goods into the market sector
Privatisation
The movement of state-owned assets into the private sector
Trickle-down effect
The income paid by rich people to the poorer people they employ
