Macro knowledge Flashcards
Fiscal policy
the use of government spending and tax policies to influence economic conditions
Monetary policy
action that a country’s central bank or government can take to influence how much money is in the economy and how much it costs to borrow
Crowding out stages
Quantitative easing stages
Transmission mechanism stages
Current account
The part of the balance of payments which records the exchange of goods and services between the UK and the rest of the world
Deferred payment
Agreement between the lender and borrower allowing the borrower to pay for goods immediately and make payments in the future
Balance of payments (current account) deficit
X > M
Balance of payments (current account) surplus
X > M
Base rate
The interest rate set by the bank of England that influences market interest rates
Claimant account
Measures unemployment by the number of individuals claiming unemployment benefit that week
Consumer price index (CPI)
Measuring inflation by taking the average weighted price level of a basket of goods and comparing it between years
How to calculate CPI
- Gather prices for common products or services in the past
- Collect prices for current products or services
- Add the product prices together
- Divide the current product price total by the past price total
- Multiply the total by 100
- Convert this number into a percentage
De-merit goods
Goods which are worse for the consumer than they perceive and so are over consumed by the market
Merits goods
Goods which are better for then consumer than they perceive and so there is under consumption within the market
Deregulation
The removal of regulations or restrictions on a particular business or industry
Indirect taxation
Taxes on spending, examples of these would be excise duty and value added tax
Interdependence
The reliance of countries on each other resulting from specialization and free trade
Labour force survey
A survey conducted in order to measure unemployment. It asks if individuals without work, actively seeking work and would be available to start in the next two week
Market failure
Where the market system fails to allocate resources efficiently
GDP equation
GDP = C + G + I + (X-M)
Unemployment Rate
Unemployment Rate= Total number of Unemployed / Total number of employed individuals
Money Multiplier Rate
1/1-mpc OR 1/mps
Real GDP
Real GDP = GDP on Nominal Terms / Deflator of GDP
Real Interest Rate
Real Interest Rate = (1 + Nominal Rate) / (1 + rate of inflation) – 1
Negative externality
A cost to a third party outside of an economic transaction
Automatic stabilisers
automatic fiscal changes as the economy moves through stages of the business cycle – e.g. a fall in tax revenues from the circular flow during a recession or an increase in state welfare benefits when unemployment is rising
Microfinance
a type of banking that provides financial services to low income individuals or groups of people who would otherwise have no access to finance
