Macro key terms Flashcards
rAbsolute advantage
When a country can produce goods and services at a lower unit cost than other countries.
Absolute poverty
Situation in which individuals have insufficient income to purchase the basic necessities for survival.
Accelerator
Theory by which the level of investment depends on the rate of change in national income.
Aggregate demand
Ability and willingness of all economic agents to spend in the economy.
Aggregate supply
Total supply of all goods and services produced within an economy at a given overall price at a given time.
Appreciation
Rise in the value of a currency in terms of another.
Asymmetric inflation target
When fluctuations above the inflation target are more significant than fluctuations below.
Automatic stabilisers
Changes in tax revenue and state spending arising automatically as the economy moves through different stages of the economic cycle.
Average tax rate
Tax paid divided by taxable income.
Balanced budget
Occurs when government expenditure is equal to taxation receipts.
Balance of payments
Record of the transactions conducted between residents of a country and the rest of the world.
Bilateral monopoly
Labour market that includes a trade union and a monopsony employer.
Broad money (m4)
Total amount of money held by households and companies in the economy, including all narrow money and less liquid forms.
Budget deficit
Occurs when government expenditure outweighs government taxation receipts.
Budget surplus
Occurs when government taxation receipts outweigh government expenditure.
Capital government expenditure
Government spending on capital project that leaves the government with assets, e.g schools, factories, roads.
Capital-output ratio
Amount of capital needed to produce a unit of output.
Central bank
Organisation charged with the responsibility for maintaining price stability by making monetary policy decisions.
Circular flow of income
Ways in which income, money, goods and services flow in an economy.
Claimant count
Measure of the number of people registered as unemployed and claiming Jobseeker’s Allowance.
Comparative advantage
When one country produces a a good or service at a lower (relative) opportunity cost than another.
Consumption (C)
Spending by households on goods and services.
Contractionary monetary policy
Government policy to increase the rate of interest/decrease money supply in order to reduce economic activity and the rate of inflation.
Crowding out
Government spending crowds out private sector investment by increasing the rate of interest, which increases the cost of borrowing for private firms.
Current account
Transactions in goods and services between the residents of a country and the rest of the world.
Current government expenditure
Government spending on day-to-day running costs, e.g buying raw materials, wages of public sector workers.
Customs union
Agreement between member countries to abolish tariffs and quotas and adapt a common external tariff for non-member countries.
Cyclical deficit
Budget deficit that occurs over the course of the economic cycle. It appears in a downturn and disappears during an upswing.
Cyclical unemployment
Unemployment that arises throughout the course of the economic cycle, during a downturn or recession.
Deflation
Decrease in the average price level measured by a weighted basket of goods.
Demand-deficit unemployment
Unemployment that arises because of a deficiency in aggregate demand in the economy, i.e the equilibrium level of output is below full employment.
Depreciation
Fall in the value of currency in terms of another.
Deregulation
Removal of regulations to open up the industry to competition.
Developed economy
Country that has industrialised and is reliant on the tertiary sector of production, and has high levels of average income measured by GDP per capita.
Developing economy
Country with reliance on the primary sector of production and low levels of average income measured by GDP per capita.
Discouraged workers
Those who have been unable to find employment and who are no longer looking for work.
Discretionary fiscal policy
Government planned and autonomous expenditure that involves a policy decision to alter government expenditure or taxation rates.
Discretionary income
Income remaining once tax and essential housing costs, such as mortgage payments, have been paid.
Disinflation
A fall in the rate of inflation.
Economically inactive
Working age people who are neither in employment nor unemployed and so are not part of the labour force.
Economic cycle
Fluctuation of the economy in periods of contraction and expansion around its underlying trend rate, following a regular pattern.
Economic development
Rise in people’s economic well-being and quality of life.
Economic growth
Change in national output over time as measured by GDP or GNP.
Economic integration
Process of becoming a member of a trading bloc.
Economic union
Occurs when two or more countries share a common monetary and fiscal policy.
Emerging economy
Economy that is making the transition from less developed to more developed, often categorised by rapid rates of growth and industrialisation.
Employment rate
Proportion of the working age population in work.
Exchange rate
Price of one currency in terms of another.
Expansionary / loosening monetary policy
Government policy to decrease the rate of interest/increase money supply in order to stimulate economic activity and increase the rate of inflation.
Expectations
Views that economic agents have about what will happen to the economy in the future.
Exports (X)
Goods and services that firms sell overseas.
Financial Sector
Way in which financial capital is channelled to the correct area of the economy.
Fisher equation of exchange
Estimates the relationship between nominal and real interest rates under inflation, using MV=PY.
Fixed exchange rate system
When the exchange rate is determined by a central body, either the government or a central bank.
Floating exchange rate system
When the exchange rate is determined by the market forces of demand and supply.
Foreign direct investment (FDI)
Investment undertaken in one country by companies based on other countries.
Free trade area (FTA)
Occurs when countries agree to remove import tariffs and other barriers to promote trade in goods and services.
Frictional unemployment
Unemployment associated with job search, i.e those who are between jobs.
Full employment
When all those who are economically active and are willing and able to work (at the going wage rate) have a job.
GDP per capita
Gross domestic product per head.
Geographical immobility
Barriers to the movement of workers between different regions.
Gini coefficient (index)
Ratio of the area between the Lorenz curve and the line of equality, and the area underneath the line of equality.
Globalisation
The increasing economic integration of national economies into the global economy.
GNI per capita
Dollar value of a country’s final income in a year, divided by its population.
