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A IB Economics HL > Macro Definitions > Flashcards

Macro Definitions Flashcards

1
Q

GDP
(Gross Domestic Product)

A

total value of final g/s produced within a country over a time period

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2
Q

nominal vs real GDP

A

nominal: total value of final g/s produced within a country over a time period, measured in current year prices

real: total value of final g/s produced within a country over a time period, measured in base year prices (adjusted for inflation)

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3
Q

GNP
(Gross National Product)

A

total value of final g/s produced by the country’s FOP over a time period, regardless of location
= GDP + net product from abroad

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4
Q

GNI
(Gross National Income)

A

total income earned by a country’s FOP over a time period, regardless of location
= GDP + net income from abroad

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5
Q

income

A

flow of money going to FOP that produce g/s

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6
Q

leakages

A

income not spent on domestic g/s

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7
Q

injections

A

spending on domestic output that does not originate from household

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8
Q

national income

A

the income earned by FOP of an economy (rent+wage+profit+interest)

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9
Q

price deflator

A

a price index that removes the impact of PL changes when measuring nominal economic variables

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10
Q

informal economy

A

the part of an economy where activity is not officially recorded and included national income statistics.

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11
Q

business cycle

A

SR fluctuations of real GDP along LR trend

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12
Q

long-term growth trend

A

average growth over the long-run (图business cycle); indicates changes in potential output

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13
Q

AD

A

total spending on domestic g/s;
at different PL; over a period of time

C＋I＋G＋(X-M)

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14
Q

AS

A

total output domestic firms are willing and able to offer;
at different PL; over a period of time

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15
Q

SRAS

A

total output domestic firms are willing and able to offer at different PL over a period of time whilst cost of FOP stays the same

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16
Q

LRAS

A

the level of output that is independent of price level and can only be increased by improvements in the quantity/quality of FOP

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17
Q

full employment level of output

A

the level of output when the economy is producing at Yp and there is only natural rate of unemployment

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18
Q

inflationary gap

A

Ye > Yp; as a result of an increase in AD

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19
Q

deflationary gap

A

Ye < Yp; as a result of a fall in AD

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20
Q

recession

A

real GDP falls;
for at least two consecutive quarters

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21
Q

SR vs LR

A

SR: the period of time when the prices of FOP, especially wages, stay the same

LR: the period of time when the prices of FOP, especially wages, changes with PL

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22
Q

Marginal Propensity to Consume (MPC)

A

the proportion of additional income that is spent by households on domestic g/s

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23
Q

unemployment

A

able and actively seeking, but without job

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24
Q

natural rate of unemployment

A

when the economy is at Yp; sum of structural, frictional and seasonal unemployment

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25
Q

cyclical unemployment

A

due to lack of AD, occurs during recession

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26
Q

structural unemployment

A

due to permanent fall in D for a type of job, leading to a mismatch between the skills of workers and the jobs available

27
Q

frictional unemployment

A

when ppl are in-between jobs (eg. quit to find a better job, move to a different location)

28
Q

labor market flexbility

A

can adjust fast to changes in labour D and S

29
Q

inflation

A

sustained increase in average PL

30
Q

disinflation

A

average PL is increasing at a decreasing rate

31
Q

Consumer Price Index (CPI)

A

average prices of g/s that the typical consumer buys; used to calculate cost of living and inflation

32
Q

inflation rate

A

the %△ of average PL between two periods, usually measured using CPI

33
Q

Phillips Curve
+distinguish between SRPC and LRPC

A

a curve showing the relationship between the rate of UE and the rate of inflation

SRPC shows the inverse relationship and trade-off between UE and inflation

LRPC suggests no trade-off between UE and inflation in the LR + there exists a natural rate of UE at Yp

34
Q

economic growth
+ distinguish between actual and potential growth

A

increase in real GDP over time

actual growth: real GDP increases; as a result of more efficient use of existing resources (shown by a movement from a point inside to on the PPC curve)

potential growth: real GDP increases; as a result of increased quality/quantity of FOP (shown by outward shift of PPC/right shift of LRAS)

35
Q

equity

A

the normative concept of fairness

36
Q

Lorenz curve

A

shows what % of the population owns what % of the total income in the economy

the further the curve is from the line of absolute equality (diagonal), the more unequal the distribution of income

37
Q

Gini coefficient

A

measures income inequality;

calculated by dividing the area between the Lorenz curve and the diagonal (A) over the area of the half-square (A+B)

38
Q

marginal tax rate

A

the proportion of one’s additional income that is paid as tax

39
Q

progressive taxation

A

tax rate increases as income increases

40
Q

direct tax

A

tax levied on individual’s income/profit/wealth

41
Q

absolute vs relative poverty

A

absolute: live below the minimum income needed to satisfy basic needs (food, clothing, shelter)

relative: live below the typical living standard of their society; a comparative measure defined as a % of society’s median income

42
Q

(international) poverty line

A

a level of income determined by a gov or international body that is just enough to satisfy basic needs (food, clothing, shelter)

43
Q

universal basic income

A

a regular cash payment to everyone in an economy independent of other sources of income; aims to reduce poverty and income inequality

44
Q

government spending (G)

A

current expenditure+ capital expenditure + transfer payment

45
Q

budget surplus

A

gov revenue > spending

46
Q

government debt

A

the total amount of money the government owes to domestic and foreign creditors

47
Q

transfer payment

A

payments made by gov to vulnerable groups such as elderly, low income, unemployed to redistribute income and reduce poverty

48
Q

automatic stabilizers

A

automatically decreases the short-term fluctuations of the business cycle (eg. unemployment benefits and progressive income tax)

49
Q

fiscal policy

A

changing gov spending and taxation to influence AD and thus growth, employment and inflation.

50
Q

infrastructure

A

physical capital typically financed by governments that is essential for economic activity

51
Q

monetary policy

A

changing interest rate and money supply to influence AD and thus growth, employment and inflation

52
Q

central bank

A

an institution responsible for monetary policy and regulating commercial banks

53
Q

interest rate

A

cost of borrowing
reward for saving

54
Q

discount rate

A

the interest rate that a central bank charges commercial banks for short-term loans

55
Q

open market operations (OMO)

A

a tool of MP where the central bank buys/sells (short-term) government bonds from/to commercial banks; to influence MS thus IR

56
Q

quantitative easing (QE)

A

expansionary MP where a central bank buys (long-term) government bonds; to increase MS and stimulate the economy

57
Q

supply-side policies
+ distinguish interventionist vs market-based

A

government policies to increase the quality/quantity of FOP, thus shifting the LRAS to the right and achieving potential growth

interventionist: direct gov spending on infrastructure, education, R&D…

market based: economic reforms to promote competitive markets

58
Q

economic development

A

sustained increase in living standards that implies higher income, better education and health, better environment as well as individual empowerment.

59
Q

sustainable economic development

A

economic development that meets the needs of the present generation without compromising the ability of future generation to meet their needs

60
Q

economic well-being

A

a multidimensional concept relating to the level of prosperity and living standards in a country.

61
Q

Economically Least Developed Countries (ELDCs)

A

low-income countries facing severe structural constraints to sustainable development, with low levels of human assets and highly vulnerability to economic and environmental shocks.

62
Q

Human Development Index (HDI)

A

a composite index of development that measures the life expectancy (health), years of schooling (education), and GNI per capita (living standards)

63
Q

human capital

A

FOP; with good skill/knowledge/health

64
Q

What are the 17 SDGs?

A

environment:
-clean water and sanitation
-climate action
-life below water, life on land
-affordable and clean energy
-responsible consumption and production
people:
no poverty, zero hunger
good health and wellbeing, quality education
gender equality, reduced inequalities
economy:
decent work and economic growth
industry, innovation, and infrastructure
society:
sustainable cities and communities
peace, justice, and strong institutions
overall:
partnership for the goals

A IB Economics HL (6 decks)

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