Macro Definitions Flashcards
Actual Growth
When an economy produces a greater amount of goods and services in one period of time than in a previous one.
AD Increase + Shift PPC Outwards
Actual Output
The total amount of goods and services that an economy is producing at a certain moment in time.
Aggregate Demand
Total value of goods and services demanded at a given price level in an economy.
It is the sum of the expenditure categories that make up GDP at a specific price level.
Aggregate Supply
Total output that all firms in a country are able to produce at any given price level.
Budget Deficit
Government expenditure is greater than tax revenue.
Budget Surplus
Tax revenue is greater than government expenditure.
Central Bank
An independent national authority responsible for the monetary system.
The central bank determines monetary policy by controlling the money supply and interest rate.
Consumer Expenditure
The total value of household spending on goods and services.
Current Expenditures
Day-to-day spending required to keep the government functioning, such as salaries for police.
Cost-push Inflation
Occurs when the costs of production rise for a country, or when short-run aggregate supply falls.
Deflation
A sustained decrease in the general price level over a period of time.
Deflationary Gap
Occurs when AD falls and creates a negative output gap (meaning that output is below the full employment level).
During this period, there can be downward pressure on the price level
Degrowth
The deliberate downscaling of production and consumption and increased focus on other factors
that contribute to well-being
Demand-pull inflation
When the demand for goods and services outstrips supply.
Development
An improvement in people’s general standards of living
- Reduction of poverty
- Increased access to goods and services that satisfy basic needs (food, shelter, health care, education and sanitation)
- Increasing employment opportunities
- Reducing inequalities in the distribution of income.
Disinflation
When the rate of inflation reduces
Exogenous Shocks
Unexpected or unpredictable event that affects an economy, either positively or negatively, that comes from outside the system.
Exports
Goods and services that are produced by domestic firms and sold to foreign countries.
They represent an inflow of foreign currency into the country.
Govt Expenditure
Where the government builds infrastructure or directly purchases goods and services.
It is an injection into the economy.
Hyperinflation
Price level rises that are more than 50% a month
Immigration
Individuals entering a country to reside on a permanent basis.
Immigration can increase the number of workers available.
Imports
Goods and services produced by foreign countries and consumed by domestic households.
They represent an outflow of domestic currency from the country.
Income
Factor payments for the factors of production, such as rent, wages, interest, dividends and profit.
Inflationary
A sustained increase in the general price level over a period of time.
