Macro 3/6 1st year Flashcards
define economic cycle
short run fluctuations of national output (real gdp) around its long term trend
what is an output gap
when actual output is greater/smaller than the productive potential of an economy
define economic growth
an increase in the capacity of an economy to produce goods and services
define inflation
a persistent rise in the price level of an economy over a period of time
what is the preferred index for measuring inflation
CPI - average price of al goods and services in an economy
define deflation
when the price level I an economy falls over time
define hyperinflation
large and rapid increases in the price level
define recession
2 consecutive quarters of negative gdp growth
define growth in capacity
increase in potential output of the economy- occurs when there is an increase in quality or quantity of resources
what does a PPF show
maximum possible output combinations of 2 goods or services an economy can achieve when all resources are fully and efficiently employed
what has to change in factors of production in order to bring about long run economic growth?
increases in quality or quantity
what has to change in factors of production in order to bring about short run economic growth?
increase in capacity of economy
why is it better for governments to invest in infrastructure
its hard to increase productivity so investing in infrastructure allows for private firms to run businesses as they are very efficient
define invention
completely new technology that improves how things are done
define innovation
taking something and making it better
define labour force
the number of individuals of working age and fit for work
when does natural unemployment occur
when there is market equilibrium between AS (how many hour workers are willing to put in and and AD (the amount of hours firms require) all at a given wage rate
when does real wage unemployment occur
market disequilibrium when the wage rates should actually be higher than what is being payed.
what does it mean to be economically active
- people in employment
- those who are unemployed but willing and able to work
what does it mean to be economically inactive
choosing not to work or not able to
what are the two types of unemployment
- without a job, have been actively seeking work and are able to start in the next 2 weeks
- out of work, have found a job and are waiting to start in the next 2 weeks
what is the labour force survey
surveying a pool of candidates in the labour market, and tells us how below max capacity a country is
what is a benefit of the labour force survey
can work out which % of the population is unemployed
what is the claimant count
identifies the number of people who are claiming benefits
what is a benefit of the claimant count
tells the government how much money is being given to those on benefits
what is the equation for unemployment rate
(no. unemployed / size of labour force) x 100
what are the four types of unemployment
seasonal, cyclical, structural, frictional
define underemployment
a situation where someone is working fewer hours than they wish
why does cyclical employment occur and how can it be fixed
lack of aggregate demand- expansionary monetary policies and expansionary fiscal policies
why does seasonal unemployment occur and how can it be fixed
demand for goods changes at different times of the year and therefore demand for workers fluctuates at different times- supply side policies
why does structural unemployment occur and how can it be fixed
a mismatch between existing skills and those needed in new growth industries- supply side policies (long term) e.g.
1. improving skills through education and training
2. encouraging investment in new growth industries
3. helping workers move from one region to another
why does frictional unemployment occur and how can it be fixed
workers are unemployed between jobs for short periods of time- supply side policies (short term)
what is the budget deficit
when gov spending > taxes
what is the budget surplus
gov spending < taxes
which 2 policies can influence aggregate demand
monetary and fiscal
what is the monetary policy
run by Bank of England and uses money supply and interest rates to influence AD
what is the fiscal policy
run by government and uses gov spending and taxation to influence AD
