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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
cyclical unemployment
due to lack of AD, occurs during recession
26
structural unemployment
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
frictional unemployment
when ppl are in-between jobs (eg. quit to find a better job, move to a different location)
28
labor market flexbility
can adjust fast to changes in labour D and S
29
inflation
**sustained** increase in average PL
30
disinflation
average PL is increasing at a decreasing rate
31
Consumer Price Index (CPI)
**average** prices of g/s that the **typical** consumer buys; used to calculate cost of living and inflation
32
inflation rate
the %△ of average PL between two periods, usually measured using CPI
33
Phillips Curve +distinguish between SRPC and LRPC
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
economic growth + distinguish between actual and potential growth
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
equity
the normative concept of **fairness**
36
Lorenz curve
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
Gini coefficient
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
marginal tax rate
the **proportion** of one's **additional income** that is paid as tax
39
progressive taxation
tax rate increases as income increases
40
direct tax
tax levied on individual's income/profit/wealth
41
absolute vs relative poverty
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
(international) poverty line
a level of income determined by a gov or international body that is just enough to satisfy basic needs (food, clothing, shelter)
43
universal basic income
a regular cash payment to everyone in an economy independent of other sources of income; aims to reduce poverty and income inequality
44
government spending (G)
current expenditure+ capital expenditure + transfer payment
45
budget surplus
gov revenue > spending
46
government debt
the total amount of money the government owes to domestic and foreign creditors
47
transfer payment
**payments made by gov to vulnerable groups** such as elderly, low income, unemployed to **redistribute income and reduce poverty**
48
automatic stabilizers
automatically decreases the short-term fluctuations of the business cycle (eg. unemployment benefits and progressive income tax)
49
fiscal policy
changing **gov spending and taxation** to influence AD and thus growth, employment and inflation.
50
infrastructure
**physical capital** typically financed by governments that is **essential for economic activity**
51
monetary policy
changing **interest rate and money supply** to influence AD and thus growth, employment and inflation
52
central bank
an institution responsible for **monetary policy** and **regulating** commercial banks
53
interest rate
cost of borrowing reward for saving
54
discount rate
the interest rate that a central bank charges commercial banks for short-term loans
55
open market operations (OMO)
a tool of MP where the central bank buys/sells (short-term) government bonds from/to commercial banks; **to influence MS thus IR**
56
quantitative easing (QE)
expansionary MP where a central bank buys (long-term) government bonds; to increase MS and stimulate the economy
57
supply-side policies + distinguish interventionist vs market-based
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
economic development
**sustained** increase in **living standards** that implies higher income, better education and health, better environment as well as individual empowerment.
59
sustainable economic development
economic development that meets the needs of the present generation without compromising the ability of future generation to meet their needs
60
economic well-being
a multidimensional concept relating to the level of **prosperity and living standards** in a country.
61
Economically Least Developed Countries (ELDCs)
**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
Human Development Index (HDI)
a composite index of development that measures the life expectancy (health), years of schooling (education), and GNI per capita (living standards)
63
human capital
FOP; with good skill/knowledge/health
64
What are the 17 SDGs?
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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