Macro Flashcards
The best credit rating that can be given to a corporation’s bonds, effectively indicating that the risk of default is negligible.
AAA credit rating
Where planned capital investment is linked positively to the past and expected growth of consumer demand or national income
Accelerator effect
The rate of growth of GDP over a period of time (percentage)
Actual economic growth
The relationship between the level of AD and the APL; it shows planned expenditure at any given possible APL
AD curve
The total demand for all goods and services at a given price level, over a given period of time
Aggregate demand
The total supply of goods and services that the country’s firms and government produce, at any given APL in a given time period
Aggregate supply
Either an inflation shock or a shock to potential national output
Aggregate supply shock
The state of confidence or pessimism held by consumers and businesses
Animal spirits
A rise in the market value of one exchange rate against another
Appreciation
Economic policy aimed at reducing a government’s deficit
Austerity
Automatic fiscal changes as the economy moves through stages of the business cycle
Automatic stablisers
Separate from other variables
Autonomous
The average ofcurrent pricesacross the entire spectrum of goods and services produced in the economy
Average price level
The proportion of income that households devote to consumption
Average propensity to consume
When a large number of people suspect that a bank may go bankrupt and withdraw their deposits
Bank run
Both companies and governments can issue bonds
Bond
When actual rate has been above the trend rate for a considerable period of time
Boom
The movement of highly skilled people from their own country to another nation
Brain drain
The BRIC grouping is short hand for the rise of emerging markets
BRIC economics
When the prices of securities or other assets rise so sharply and at such a sustained rate that they exceed valuations justified by fundamentals, making a sudden collapse likely
Bubble
Occurs when government spending is greater than tax revenues
Budget deficit
Expectations about the future of the economy
Business confidence
A phenomenon whereby GDP around its underlying trend following a regular pattern
Business cycle
A measure of output per unit of capital
Capacity productivity
Measures how much of the productive potential of the economy is being used
Capacity utilisation
Man-made aid to production
Capital
A stock or a bond market where firms can raise money for investment purposes
Capital market
The value of the total stock of capital inputs in the economy
Capital stock
Replacing workers with machines in a bid to increase productivity and reduce the unit cost of production
Capital-labour substitution
When countries that start off poor tend to grow more rapidly than countries that start off rich
Catch-up effect
The assumption that other factors of something remain constant, so don’t affect it
Ceteris paribus
A model of the economy which shows the movement of goods and services between households and firms and their corresponding payments in money terms
Circular flow of income
The number of people claiming unemployment-related benefits
Claimant count
They believe the long-run equilibrium is always at Yfe
Classical beliefs
An economy operating without imports and exports
Closed economy
The relative advantage that one country or producer has over another
Comparative advantage
Constant prices tells us that the data has been inflation adjusted
Constant prices
Expectations about the future including interest rates, incomes and jobs
Consumer confidence
Products that are not used up immediately when consumed
Consumer spending
The government’s preferred measure of inflation
Consumption
The relationship between consumption and disposable income (graph); it’s position depends on the other factors that affect how much households spend on consumption
Consumption function
A tax on the profits made by companies
Corporation tax
An increase in the price level caused by a sustained increase in firms’ costs of production
Cost-push inflation
The assessment given to debts and borrowers by a ratings agency according to their safety from an investment standpoint
Credit rating
Small rises in the general price level over a long period
Current account
A period of time where import tariff rates rise
Current account deficit
A trade deficit that arises purely due to changes in the economy’s cycle
Cyclical tade deficit
Unemployment caused by a lack of aggregate demand for goods and services
Cyclical unemployment
When a borrower has broken the terms of a loan or other debt, for example if a borrower misses a payment
Default
A persistent fall in the general price level of goods and services
Deflation
A decline in the share of national income from manufacturing industries
Deindustrialisation
Unemployment that arises because of a deficiency of aggregate demand in the economy, so that the equilibrium level of output is below full employment
Demand-deficit unemployment
Inflation initiated by an increase in AD
Demand-pull inflation
A fall in the market value of one exchange rate against another
Depreciation
Used to describe a severe recession which may become a prolonged downturn in the economy
Depression
Reducing barriers to entry in order to make a market more competitive
Deregulation
Countries lacking a high degree of industrialisation and/or other measures of development
Developing country
People often out of work for a long time who give up on job search
Discouraged workers
Deliberate attempts to affect aggregate demand using changes in government spending, direct and indirect taxation and borrowing
Discretionary fiscal policy
Disposable income adjusted for spending on essential bills
Discretionary income
A fall in the rate of inflation
Disinflation
Gross income less income tax and national insurance contributions plus cash welfare benefits
Disposable income
When an economy goes into recession twice without having undergone a full recovery in between
Double-dip recession
When actual rate is still above the trend rate, but falling
Downturn
When a producer in one country exports a product to another at a price below the price it charges in its home market or below the costs of supply
Dumping
The concept that people’s demands have exceeded the Earth’s ability to cope with the rising consumption of its resources
Ecological debt
Variations in the annual rate of growth of an economy over time
Economic cycle
An increase in the real value of goods and services produced in a country or area as measured by the annual % change in real national output
Economic growth
Unpredictable events in the economy
Economic shocks
When indicators don’t change much from one year to another
Economic stability
Those who are unemployed and actively seeking employment
Economically active
Those who are of working age but are neither in work nor actively seeking work
Economically inactive
The financial markets of developing countries
Emerging markets
No tendency for change in real GDP or APL when at equilibrium
Equilibrium
The rate at which one currency can be exchanged for another
Exchange rate
A relaxation of monetary policy means an attempt to use an expansionary monetary policy to boost aggregate demand, output and jobs
Expansionary monetary policy
How we expect the future to unfold
Expectations
The value of the goods and services purchased by households and by government, investment in machinery and buildings
Expenditure measure of GDP
Policies that are designed to ‘switch’ expenditure from imports to domestically produced goods in order to improve the balance of payments and stimulate GDP
Expenditure-switching policies
Sales from selling goods and services overseas
Export revenue
A strategy for achieving rapid economic growth through the promotion of export activity
Export-led growth
Goods and services sold to consumers in overseas markets
Exports
For consumers the main financial assets are property, pensions, equities, unit trusts and cash
Financial assets
Changes in monetary policy or fiscal policy designed to gradually manage the level of aggregate demand and prices
Fine-tuning
Decisions by a government to reduce the amount of government borrowing
Fiscal austerity
When government expenditure is higher than the revenue from tax receipts in a particular year
Fiscal deficit
A government’s policy regarding taxation and public spending
Fiscal policy
Many governments seek to maintain a degree of balance between tax revenues and public sector spending
Fiscal stability
Government measures, normally involving increased public spending and lower direct or indirect taxation
Fiscal stimulus
A prediction made about the likely future performance of an economy
Forecast
Investment from one country into another that involves establishing operations or acquiring tangible assets
Foreign debt investment
When trade is allowed to occur without any form of restriction
Free trade
A level of national output where all available factor inputs are fully employed
Full capacity output
When there enough job vacancies for all the unemployed to take work
Full employment
A measure of the extent to which groups of households receive less than an equal share of income
Gini coefficient
The deepening of relationships between countries of the world reflected in an increasing level of overseas trade and investment
Globalisation
A rule introduced by the former Labour government which says that borrowing on state provided goods and services should be zero over the course of one economic cycle
Golden rule
The total stock of unpaid debt issued by a government
Government debt
Spending and investing carried out by the government at a national and local level; often politically motivated
Government expenditure
A measure of the economic activity carried out in the domestic economy over a period of time
Gross domestic product (GDP)
