macro def(green) Flashcards
Accelerator effect
a rise in national income can lead to a proportionally greater final rise in investment
Aggregate demand*
the total demand for a country’s goods and services at a given price level and in a given time period
Aggregate supply
the total amount that producers in an economy are willing and able to supply at a given price level in a given time period
Average propensity to consume
the proportion of disposable income saved in an economy. consumer expenditure divided by disposable income
Average propensity to save
the proportion of disposable income saved in an economy. savings divided by disposable income
Balance of payments*
a record of the money flows into and out of a country in a year
Circular flow of income*
a model of the movements of spending and income throughout the economy, which shows the impact of injections and withdrawals on real GDP
Consumer expenditure
spending by households on domestically produced goods and services
Disposable income
total personal income minus total personal taxes
Economic growth
in the short run, an increase in real GDP. in the long run, an increase in productive capacity
Economic stability
avoiding volatility in economic growth rates, inflation, employment and exchange rates
Exchange rate*
the value of one currency in terms of another currency
Expenditure method measure of GDP
add up all the spending on goods and services in a year
Exports
the value of goods and services sold abroad
Full employment (keynesian)
full employment is achieved when there is no cyclical unemployment (demand deficient unemployment) and therefore only frictional voluntary unemployment in the economy. i.e. no involuntary unemployment (as it is a waste of human potential)
Full employment (monetarist)
full employment or the ‘non-inflation accelerating rate of unemployment’ NAIRU is the level of involuntary unemployment that a central bank judges to be acceptable or necessary to keep inflation low. i.e. at or around the 2% inflation target
GDP*
the value of output produced in a country in a year
Government spending
current and capital expenditure on goods and services by the the central government
Imports
the value of goods and services bought from abroad
Income method measure of GDP
add up all the factor incomes earned in the country in a year
Income redistribution
the transfer of income from rich to poor to ensure greater access to necessities
Inflation*
a sustained rise in the general price level
Injections
additions of extra spending into the circular flow of income in the form of government spending, investment and export revenue
Investment
business and government spending on capital goods
Keynesian school
a group of economists who believe that macroeconomy can settle at an equilibrium that is below full employment
Leakages
withdrawals of possible spending from the circular flow of income in the form of savings, taxation and import expenditure
Macro economic equilibrium
a situation where aggregate demand equals supply and real GDP is not changing
Marginal propensity to consume
the proportion of an increase in disposable income that households devote to consumer expenditure
Marginal propensity to import
the proportion of an increase in disposable income that households spend on imported goods and services
Marginal propensity to save
the proportion of an increase in disposable income that households devote to saving
Marginal propensity to tax
the proportion of an increase in disposable income that households pay as tax
Monetarist school
a group of economists who believe that the macroeconomy always adjusts rapidly to a full employment level of output
Multiplier effect*
the process by which any change in a component of aggregate demand results in a greater final change in real GDP
Net exports*
the value of exports minus the value of imports
Output method measure of GDP
add up the total value-added or final value of goods and services produced in a year
Price level*
the average of each of the prices of all the products produced in an economy
Real GDP*
the country’s output measured in constant prices and so adjusted for inflation
Shock
a shock is an unexpected or unpredictable event that affects an economy, either positively or negatively
Unemployment*
describes people without a job, who have been actively seeking work in the past four weeks and are available to start work in the next two weeks (ILO) /the number of people who are willing and able to work (economically active actual labour force) but who cannot find work
