Macro economics key words year 2 Flashcards
Absolute Advantage
A country has an absolute advantage if it can produce more of a good than other countries from the same amount of resources.
Aggregate Demand
Total planned spending on the goods and services produced within the economy in a particular time period.
Aid
Goods and services, and “soft” loans given by the government of one county or a multilateral institution such as the world back to help another country.
Bank rate
the interest rate set by the BofE which is used as a benchmark for setting interest rates that it charges when lending to commercial banks or other financial institutions.
Bonds
Financial securities sold by companies (corporate bonds) or by governments (government bonds) which are a form of long term borrowing. Bonds usually have a maturity date on which they are redeemed, with the borrower usually making a fixed interest payment each year until the bond matures.
Broad money
the part of the stock of money (or money supply) made of cash, other liquid assets such as a bank or building society deposits, but also some less liquid assets. The measure of broad money used by the BofE is called M4.
Capital markets
Where securities such as shares and bonds are issued to raise medium to long term financing, and where shares and bonds are then traded on the ‘second-hand’ part of the market.
Capital ratio
the amount of capital on a bank’s balance sheet as a proportion of its loans
The circular flow of income
in the economy, income received by households from selling labour and other factors services to firms circulates back to the firms. This is complicated by withdrawals are taken into account such as saving, spending on imports or taxes paid. similarly injections of spending such as investment by firms, government spending and overseas spending on UK exports.
Commercial bank
A financial institution which aims to make profits by selling banking services to its customers. Also known as retail banks or ‘high street’ banks.
Comparative advantage
This is measured in terms of opportunity cost. The country with the least opportunity cost when producing a good posses a comparative advantage in that good.
Corporate bonds
A debt security issued by a company and sold as new issues to people who lend long-term to the company. they can usually be resold second hand on a stock exchange.
Corruption
A barrier holding back economic growth and development, especially in less developed countries.
Coupon
The guaranteed fixed annual interest payment, often divided into two 6-month payments, paid by the issuer of a bond to the owner of the bond.
Credit
When a bank makes a loan it creates credit. The loan results in the creation of an advance, which is an asset on the bank’s balance sheet, and a deposit, which is a liability of the bank.
Currency Union
An agreement between a group of countries to share a common currency, and usually to have a single monetary and foreign exchange rate policy.
Current account
Measures all the currency flows into and out of a country in a particular time period in payment for exports and imports of goods and services, together with primary and secondary incomes flows.
Customs Union
A trading bloc in which member countries enjoy internal free trade in goods and possibly services, with all member countries protected by a common external tariff barrier.
Debt
Money people owe.
Economic Growth
The rate of increase in the potential output of an economy.
Education and Training
Education develops individual knowledge and intellect, while training develops work skills. Both are necessary for economic growth and development.
Equity
Is wealth; shares are known as equities. However, equity can also mean fairness or justness.
European Union
An economic and partially political union established in 1993 after the ratification of the Maastricht Treaty by members of the European community and since expanded to include numerous central and eastern European nations.
Eurozone
The name used for the group of EU countries that have replaced their national currencies with the euro. In 2019, 19 of the 28 EU countries were in the eurozone.
Expenditure-switching Policy
A government policy which aims to eliminate a current account deficit by switching domestic demand away from imports to domestically produced goods. Conversely, to reduce a current account surplus, the policy would aim to switch domestic demand away from domestically produced goods towards imports
Export Subsidies
Money given to domestic firms by the government to encourage firms to sell their product abroad and to help make their goods cheaper in export markets.
Financial Account
The part of the balance of payments which records capital flows into and out of the economy.
Financial Conduct Authority (FCA)
Primarily responsible for macroprudential regulation, the FCA aims to make sure that financial markets work well so that consumers get a fair deal, by ensuring that the financial industry is run with integrity and that consumers can trust that firms have their best interests at heart, and by providing consumers with appropriate financial products and services.
Financial Markets
Markets in which financial assets or securities are traded.
Financial Policy Committee
The part of the BofE charged with the primary objective of identifying, monitoring and taking action to remove or reduce systemic risk with a view to protecting and enhancing the resilience of the UK financial system. The committee’s secondary objective is to support the economic policy of the government.
Fisher Equation of Exchange
the stock of money in the economy multiplied by the velocity of the circulation of money equals the price level multiplied by the quantity of real output in the economy: MV=PQ
