Macro Definitons Flashcards

1
Q

Accelerator effect

A

Where planned capital investment is linked positively to the past and expected growth
of consumer demand or national income

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2
Q

Aggregate supply

shock

A

Either an inflation shock or a shock to potential national output; adverse aggregate
supply shocks of both types reduce output and can increase the rate of inflation

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3
Q

Austerity

A

Economic policy aimed at reducing a government’s deficit (or borrowing). Austerity can
be achieved through increases in government revenues - primarily via tax rises - and/or
a reduction in government spending or future spending commitments.

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4
Q

Budget deficit

A

Occurs when government spending is greater than tax revenues. Reducing the deficit
can be achieved by tax increases or cuts in government spending or a period of
economic growth which brings about a rise in direct and indirect tax revenues

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5
Q

Claimant Count

A

The number of people claiming unemployment-related benefits

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6
Q

Classical LRAS

A

The classical LRAS curve is drawn as vertical because classical economists argue that a country’s productive capacity is determined by factors other than price and demand
such as investment and innovation

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7
Q

Consumer

confidence

A

Expectations about the future including interest rates, incomes and jobs

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8
Q

Consumer price

index

A

The consumer price index (CPI) is the government’s preferred measure of inflation

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9
Q

Cost push inflation

A

An increase in the price level caused by a sustained increase in firms’ costs of
production

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10
Q

Current account

A

The overall balance of credits minus debits for trade in goods, trade in services,
investment income and transfers

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11
Q

Cyclical

unemployment

A

Unemployment caused by a lack of aggregate demand for goods and services, where
national output < potential output leading to a negative output gap

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12
Q

Deflation

A

A persistent fall in the general price level of goods and services

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13
Q

Depression

A

Used to describe a severe recession which may become a prolonged downturn in the
economy and where a nation’s GDP falls by at least 10 per cent

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14
Q

Discouraged

workers

A

People often out of work for a long time who give up on job search

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15
Q

Economic cycle

A

Variations in the annual rate of growth of an economy over time

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16
Q

Economic growth

A

An increase in the real value of goods and services produced in a country or area as
measured by the annual % change in real national output. Also a long-run increase in a
country’s productive capacity

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17
Q

Economic shocks

A

Unpredictable events such as volatile prices for oil, gas and foodstuffs

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18
Q

Economic stability

A

When indicators such as growth, prices and unemployment do not change much from
one year to another

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19
Q

Exchange rate

A

The rate at which one currency can be exchanged for another.

20
Q

Expansionary

monetary policy

A

A relaxation of monetary policy means an attempt to use an expansionary monetary
policy to boost aggregate demand, output and jobs – includes lower interest rates

21
Q

Fiscal deficit

A

This happen when government expenditure is higher than the revenue from tax
receipts in a particular year

22
Q

Fiscal policy

A

A government’s policy regarding taxation and public spending. It can be loose (with the
emphasis on increased spending and lower tax revenue to boost economic activity,
with the acceptance of a wider fiscal deficit) or tight (with the emphasis on cutting
spending and boosting tax revenue, resulting in a slower economy

23
Q

Full employment

A

When there enough job vacancies for all the unemployed to take work

24
Q

Gross Domestic

Product per capita

A

National income per head of population, a baseline measure of living standards

25
Immobility of labour
Barriers to the movement of people between areas and between jobs
26
Inflation
A sustained increase in the general price level for goods and services
27
Inflation target
The Bank of England has a CPI inflation target, which is currently 2 per cent
28
Inflationary | pressures
Demand and supply-side pressures that can cause a rise in the general price level. Demand-pull inflationary pressure is greatest when actual GDP exceeds potential GDP causing a positive output gap. Cost-push inflationary pressure can arise from increases in unit wage costs, rising import prices and an increase in the prices of raw materials, fuel and components used in production
29
Investment
Spending on capital goods including plant & machinery and infrastructure
30
Macroeconomic | performance
Macroeconomic | performance
31
Marginal propensity | to consume
The proportion of any change in income that is spent rather than saved
32
Marginal propensity | to save
The change in total saving as a result of a change in income
33
Multiplier effect
If there is an initial injection (e.g. a rise in exports) into the economy then the final increase in aggregate demand and real GDP will be greater.
34
Output gap
Difference between actual and potential national output. A negative output gap means that an economy has a large margin of spare productive capacity
35
Price stability
Price stability occurs when there is low inflation and the price changes that do occur have little impact on day-to-day decisions of people
36
Productivity
A measure of efficiency e.g. output per person employed or output per person-hour
37
Propensity to save
Proportion of any change in income that is saved rather than spent
38
Real disposable | income
Income after taxes and welfare benefits, adjusted for the effects of inflation
39
Real income
Nominal income adjusted for price changes, expressed at constant prices
40
Recession
A period of at least six months when an economy suffers a fall in output. Or a broadlybased contraction in output, employment, investment and confidence
41
Recovery
A phase of the economic cycle, after a recession/depression, during which real GDP starts to increase and unemployment begins to fall
42
Retail Price Index | RPI
The RPI is broadly similar to the CPI but includes mortgage repayments and some taxes, and excludes the top 4 per cent of earners. It is used to calculate annual changes in wages, state benefits and pensions
43
Saving ratio
The percentage of disposable income that is saved rather than spent
44
Structural | unemployment
Unemployment that results from the decline in a particular industry which leaves people unemployed because they do not have the skills needed by the industries that are growing
45
Under-employment
Workers are underemployed when they are willing to supply more hours of work than their employers are prepared to offer.