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Econ SL > Macro Economics Vocab > Flashcards

Macro Economics Vocab Flashcards

1
Q

Actual growth

A

Occurs when real output (real GDP) increases
through time and is a result of greater or better
use of existing resources. In the PPC model it
can be illustrated by a movement from a point
inside a PPC to another point in the northeast
direction

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2
Q

Aggregate demand (AD)

A

Planned spending on domestic goods and
services at different average price levels, per
period of time. Consists of consumption,
investment and government expenditures plus
net exports.

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3
Q

Aggregate demand curve

A

A curve showing the planned level of spending
on domestic output at different average price
levels

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4
Q

Aggregate supply (AS)

A

The planned level of output domestic firms are
willing and able to offer at different average
price levels.

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5
Q

Appreciation

A

When the price of a currency increases in a

floating exchange rate system.

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6
Q

Budget deficit

A

When government expenditures exceed
government (tax) revenues usually over a period
of a year.

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7
Q

Business confidence

A

A measure of the degree of optimism that

businesses have about the economic future.

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8
Q

Business cycle

A

The short-term fluctuations of real GDP around

its long-term trend (or potential output).

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9
Q

Capital

A

Physical capital refers to means of production
that include machines, tools, equipment
and factories; the term may also refer to the
infrastructure of a country. Human capital refers
to the education, training, skills and experience
embodied in the labour force of a country.

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10
Q

Central bank

A

An institution charged with conducting
monetary and exchange rate policy, regulating
behaviour of commercial banks, and providing banking services to the government and commercial banks.

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11
Q

Circular flow of income

A

A simplified illustration that shows the flows of

income and expenditures in an economy.

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12
Q

Consumer price index (CPI)

A

The average of the prices of the goods and
services that the typical consumer buys
expressed as an index number. The CPI is used
as a measure of the cost of living in a country
and to calculate inflation.

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13
Q

Contractionary fiscal policy

A

Refers to a decrease in government
expenditures and/or an increase in taxes that
aim at decreasing aggregate demand and thus
reducing inflationary pressures.

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14
Q

Contractionary monetary policy

A

A policy employed by the central bank involving
an increase in interest rates and aimed at
decreasing aggregate demand and thus
inflationary pressures. Referred to also as tight
monetary policy.

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15
Q

Deflation

A

A sustained decrease in the average price level

of a country.

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16
Q

Deflationary/recessionary gap

A

Arises when the equilibrium level of real output
is less than potential output as a result of a
decrease in AD

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17
Q

Demand side policies

A

Refers to economic policies that aim at affecting
aggregate demand and thus macroeconomic
variables such as growth, inflation and employment; demand side policies include fiscal
policy and monetary policy.

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18
Q

Depreciation

A

A decrease in the value of a currency in terms
of another currency in a floating or managed
exchange rate system.

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19
Q

Deregulation

A

Policies that reduce or eliminate regulations
related to the operation of firms so that
production costs decrease—resulting in
increased competition and higher levels of
output.

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20
Q

Expansionary fiscal policy

A

Refers to an increase in government
expenditures and/or a decrease in taxes that aim
at increasing aggregate demand and thus real
output and employment.

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21
Q

Expansionary monetary policy

A

Monetary policy aiming at increasing aggregate
demand through a decrease in interest rates;
also referred to as easy monetary policy.

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22
Q

Expenditure approach

A

One of three analytically equivalent approaches
of measuring GDP that adds all the expenditures
made on final domestic goods and services
over a period of time by households, firms, the
government and foreigners.

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23
Q

Expenditure reducing

A

Contractionary demand side policies aiming
at decreasing national income and thus
expenditures on imports so that a current
account deficit narrows

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24
Q

Expenditure switching

A

Policies aimed at switching expenditures away
from imports towards domestically produced goods and services by making imports more expensive in order to narrow a current account
deficit. It includes lowering the exchange rate as
well as adopting trade protection.

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25
Fiscal policy
A demand-side policy using changes in government spending and/or direct taxation to influence aggregate demand and thus growth, employment and prices.
26
Full employment
A goal of macroeconomic policy that aims at fully utilizing the scarce factor of production labour. Full employment exists when the economy is producing at its potential level of real output and thus there is only natural unemployment (the AD–AS model considers the AD and AS curves together). In the production possibilities curve (PPC model), full employment exists when the economy is producing on the PPC.
27
Gini coefficient
A measure of the degree of income inequality of a country that ranges from zero (perfect income equality) to one (perfect inequality). Diagrammatically it is the ratio of the area between the Lorenz curve and the diagonal over the area of the half-square.
28
Government spending (G)
Refers to all spending by the government that is distinguished into current expenditures, capital expenditures and transfer payments
29
Gross domestic product (GDP)
The value of all final goods and services produced within an economy over a period of time, usually a year or a quarter.
30
Gross national income (GNI)
The income earned by all national factors of production independently of where they are located over a period of time; it is equal to GDP plus factor income earned abroad minus factor income paid abroad.
31
Income approach
One of the three equivalent ways that GDP can be measured, by adding all the incomes generated in the production process (wages, profits, interest and rent) for a given time period.
32
Anti-monopoly regulation
Laws and regulations that are intended to restrict anti-competitive behaviour of firms that are abusing their market power.
33
Automatic stabilizers
Institutionally built-in features (like unemployment benefits and progressive income taxation) that tend to decrease the short-term fluctuations of the business cycle without the need for governments to intervene.
34
Average tax rate
The ratio of the tax paid by an individual over | their income expressed as a percentage.
35
Business tax
Tax levied on the income of a business or | corporation.
36
Circular economy
An economic system that looks beyond the linear take-make-dispose model and aims to redefine growth, focusing on society-wide benefits. It is based on three principles: design out waste, keep products and materials in use, and regenerate natural systems.
37
Consumer confidence
A measure of the degree of optimism that households have about their income and economic prospects.
38
Cost-push inflation
Inflation that is a result of increased production costs (typically because of rising money wages or rising commodity prices) and illustrated by a leftward shift of the SRAS curve.
39
Crowding out
The idea that expansionary fiscal policy is not very effective in increasing aggregate demand because the increased borrowing needs of the government to finance the increased expenditures could lead to increased interest rates. Thus, reducing private sector investment, consumer spending, and other components of AD.
40
Cyclical (demand-deficient) unemployment
Unemployment that is a result of a decrease in aggregate demand and thus of economic activity; it occurs in a recession.
41
Demand management
Policies that aim at manipulating aggregate demand through changes in interest rates (monetary policy) or changes in government expenditures and taxation in order to influence growth, employment and inflation.
42
Demand-pull inflation
Inflation that is caused by increases in aggregate | demand
43
Deregulation
Policies that reduce or eliminate regulations related to the operation of firms so that production costs decrease—resulting in increased competition and higher levels of output.
44
Discount rate
The interest rate that a central bank charges | commercial banks for short-term loans (also referred to as the refinancing rate).
45
Disinflation
When the average price level continues to rise but at a slower rate so that the rate of inflation is positive but lower.
46
Economic growth
Refers to increases in real GDP over time.
47
Economic growth
Refers to increases in real GDP over time.
48
Frictional unemployment
Unemployment of individuals who are inbetween jobs, as people quit to find a better job or to move to a different location
49
Full employment
A goal of macroeconomic policy that aims at fully utilizing the scarce factor of production labour. Full employment exists when the economy is producing at its potential level of real output and thus there is only natural unemployment (the AD–AS model considers the AD and AS curves together). In the production possibilities curve (PPC model), full employment exists when the economy is producing on the PPC.
50
Full employment level of output
The level of output that is produced by the economy when there is only natural unemployment.
51
Gini coefficient
A measure of the degree of income inequality of a country that ranges from zero (perfect income equality) to one (perfect inequality). Diagrammatically it is the ratio of the area between the Lorenz curve and the diagonal over the area of the half-square.
52
Government (national) debt
The sum of all past budget deficits minus any budget surpluses; the total amount the government owes to domestic and foreign creditors
53
Growth in production possibilities
When the production possibilities of a country increase because of more/better resources and/or better technology becoming available; illustrated by a shift outwards of the PPC.
54
Happiness Index
An index that is used to measure economic wellbeing of a population using several quality of life dimensions.
55
Firms
Productive units that transform inputs (factors of production) into output (goods and services), usually aiming at earning profits.
56
Households
Groups of individuals in the economy who share the same living accommodation, who pool their income and jointly decide the set of goods and services to consume.
57
Human Development Index (HDI)
A composite index of development that reflects the three basic goals of development, which are a long and healthy life, improved education, and a decent standard of living. The variables measured are life expectancy at birth, mean years of schooling and expected years of schooling, and GNI per capita (PPP US$).
58
Imports
The value of goods and services purchased | domestically that are produced abroad.
59
Industrial policies
A type of interventionist supply-side policies whereby the government chooses to support specific industries through preferential tax cuts, subsidies, subsidized loans and other means as they are considered pivotal in the growth prospects of the economy.
60
Inflation
A sustained increase in the average level of | prices.
61
Inflationary gap
The case where equilibrium real output exceeds potential output as a result of an increase in AD.
62
Inflation rate
The percentage change between two periods of the average price level, usually measured through the CPI.
62
Inflation rate
The percentage change between two periods of the average price level, usually measured through the CPI.
63
Informal economy
Refers to the part of an economy where activity is not officially recorded, regulated or taxed. The activities of the informal economy are not included in a country’s national income figures.
64
Infrastructure
Physical capital typically financed by governments that is essential for economic activity to take place, including roads, power, telecommunications and sanitation, generating significant positive externalities
65
Injections
Within the circular flow model these refer to spending on domestic output that does not originate from households and thus includes investment spending by firms, government expenditures and exports.
66
Interest rate
The cost of borrowing money or the reward for saving money over a period of time expressed as a percentage.
67
Interventionist supply side policies
A set of policies that aim to increase an economy’s productive capacity that relies on a greater role for the government; these include expenditures on infrastructure, education, health care, research and development, and all industrial policies.
68
Investment (I)
Spending by firms on capital goods such as machines, tools, equipment and factories.
69
Labour market flexibility
The labour market is considered flexible if it can adjust fast and fully to changes in labour demand and labour supply conditions
70
Leakages
Income not spent on domestic goods and services. It includes savings, taxes and import expenditure.
71
Long-run aggregate supply (LRAS)
Aggregate supply that is dependent upon the resources and technology in the economy, thus being independent of the price level. It is vertical at the level of potential output. It can only be increased by improvements in the quantity and/or quality of factors of production as well as improved technology.
72
Long run in macroeconomics
The period of time when the prices of all factors of production, especially wages, change to match changes in the price level
73
Marginal tax rate
The proportion of a person’s extra or additional income that is paid in tax, usually expressed as a percentage.
74
Market-based supply side policies
A set of policies based on well-functioning competitive markets in order to promote longterm economic growth, shown by increases in long-run aggregate supply.
75
Market-oriented approaches
Approaches or policies that are based on the actions of private decision-makers operating in markets with a minimum amount of government intervention.
76
Money supply
The total amount of money available at a particular time, consisting of currency plus checking accounts.
77
Output approach
One of the three equivalent ways that GDP can be measured, it adds up the value of final goods and services produced in a given time period.
78
Poverty
Arises when the lack of material possessions or money prevent an individual or a family from achieving a minimum satisfactory standard of living.
79
Privatization
The sale of public assets to the private sector. May be a type of supply-side policy.
80
Productive capacity
The greatest capability of an economy to produce, usually measured by maximum possible output of an economy.
81
Progressive taxation
Taxation where the fraction of tax paid increases as income increases. The average tax rate increases
82
Proportional tax
A system of taxation where tax is levied at a constant rate as income rises.
83
Purchasing power parity (PPP)
A method used to make the buying power of different currencies equal to the buying power of US$1. PPP exchange rates are used to make comparisons of income or output variables across countries while eliminating the influence of price level differences.
84
Quantitative easing
An expansionary monetary policy where a central bank buys (long term) government bonds or other financial assets, in order to stimulate the economy and increase the money supply.
85
Real GDP
The total value of all final goods and services produced in an economy in a given time period, usually one year, adjusted for inflation.
86
Real X
Adjusted for inflation
87
Recession
Occurs when real GDP falls for at least two | consecutive quarters.
88
Regressive taxation
Taxation where the fraction of tax paid decreases as income increases. The average tax rate decreases. All indirect taxes are regressive.
89
Short-run aggregate supply (SRAS)
The total quantity of real output (real GDP) offered at different possible price levels in the short run (when wages and other resource prices are constant).
90
Structural unemployment
A kind of long-term unemployment that arises from a number of factors including: technological change; changes in the patterns of demand for different labour skills; changes in the geographical location of industries; labour market rigidities
91
Supply-side policies
Government policies designed to shift the longrun aggregate supply curve to the right, thus increasing potential output in the economy and achieving economic growth
92
Transfer payments
Payments made by the government to vulnerable groups in a society, including older people, low income people, unemployed and many more. The objective is to transfer money from taxpayers to those who cannot work, to prevent them from falling into poverty.
93
Unemployment
When a person (who is above a specified age and is available to work) is actively looking for work, but is without a job.
94
Unemployment rate
The number of unemployed workers expressed as a percentage of the total workforce
95
Wealth
The total value of all assets owned by a person, firm, community, or country minus what is owed to banks or other financial institutions.

Econ SL (18 decks)

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