macro definitions Flashcards
Accelerator effect
The relationship between the change in new investment and the rate of change of national income
aggregate demand
total planned expenditure in the economy
aggregate supply
total value of goods and services supplied in the economy
balance of payments
a record of a country’s international transactions over a year
balance of trade
visible exports minus visible imports
balanced budget
where government receipts equal government spending in a fiscal year
broad money
money half in banks and building societies that is not immediately accessible
budget deficit
where the government spending exceeds spending receipts in a fiscal year
budget surplus
where the government receipts exceeds government spending in a fiscal year
circular flow of income
model explaining the equilibrium level of national income
consumption
spending by domestic households on goods and services
cost push inflation
where increased costs of production result in firms increasing their prices leading to an increase in general price level
CPI
consumer price index, used to measure inflation
cyclical unemployment
demand-deficient unemployment resulting from a downturn in the economic cycle
deflation
A situation where the general price levels fall.
Demand management
Using monetary and fiscal policy to control aggregate demand to minimise fluctuations in the economic cycle.
Demand-pull inflation
Where aggregate demand exceeds aggregate supply leading to a price level increase.
Deregulation
the process of removing government controls from markets
Discretionary fiscal policy
The deliberate manipulation of government spending and taxation to influence the economy.
Disposable income
Income available to households after the payment of income tax and national insurance contributions
Economic cycle
The tendency for economic growth to fluctuate over time.
Economic growth
An increase in the productive capacity of a nations over time.
Exchange rate
The price of one currency expressed in terms of another.
Exports
Goods and services sold abroad.
Fiscal policy
control of the economy via the use of taxation and government spending
Frictional unemployment
People between job, i.e engaged in job search
GDP
gross domestic product-The total value of goods and services produced in the economy
Geographical immobility
Where workers find it difficult to move where employment opportunities may be
Globalisation
The ability to produce goods anywhere in the world and sell them in any country
Hot money
Money that is liable to rapid transfer from one country to another.
human capital
The skills, abilities, knowledge and motivation of labour
Imports
Purchases of goods and services from abroad
Income
a flow of income to a factor of production over a period of time e.g salary
Inflation
A persistent increase in the general price level
Injection
Money that originates outside the circular flow of income and so boosts national income
Interest rate
The cost of borrowing, the reward for saving or the opportunity cost of spending.
Investment
spending by firms on new capital equipment
Macroeconomics
Study of the economy as a whole
Monetary policy
controlling the economy via changes in interest rates and the money supply
Mortgage
loan to buy a property
MPC
monetary police committee of the bank of England, made up of economists and bankers who meet monthly to decide whether of not to alter the base rate of interest.
Money supply
The total amount of money in the economy
multiplier effect
where an increase of decrease in spending leads to a larger than proportional change in national income
Narrow money
Notes, coins and balances available for current transactions
Negative equity
Where the value of one’s house is lower than the outstanding mortgage
Negative output gap
Where the economy is producing less than its trend output
Nominal
not adjusted for inflation
Occupational immobility
where workers find it difficult to secure ‘new’ jobs as patterns of demand and employment change, as they lack the necessary skills
Participation rate
Proportion of the country’s working age population that makes up the labour force
Positive output gap
When actual GDP exceeds the trend rate of GDP, increasing inflationary pressure
Privatisation
Sale of government owned assets to the private sector
Real GDP
GDP adjusted for the effects of inflation
Recession
2 or more quarters of negative growth of GDP
Structural unemployment
Unemployment caused by a change in the pattern of demand in an economy
Subsidy
A payment made by government to producers to encourage greater production of a good or service
Supply-side policies
A range of measures designed to increase AS by improving the efficiency of markets
Tariff
A tax on imports
Transmission Mechanism
How changes in the base rate of interest influence the components of AD.
Unemployment
Those of a working age who are willing and able to work who do not currently have a job
Unemployment trap
Where individuals receive more in benefit payments than they would in income in employment
Voluntary unemployment
Workers not prepared to take a job at current wage rates
Wealth
A stock of owned assets, e.g housing property, shares
Wealth effect
Where a rise in the value of household wealth encourages consumers to spend more and save less
Withdrawals
Money taken out of the circular flow of income, which reduces national income
productive capacity
Maximum possible output of an economy
real income
Real the income of individuals or nations after adjusting for inflation. It is calculated by subtracting inflation from the nominal income.
recovery
A period of increasing business activity signaling the end of a recession.
