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AS Economics > Macro: National Economy > Flashcards

Macro: National Economy Flashcards

0
Q

Aggregate demand

A

Total consumption expenditure within an economy over a certain period of time

Consumption + investment + gov spending + net exports

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1
Q

Aggregate supply

A

Total output produced in a given time

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2
Q

Economic cycle

A

Shows the fluctuations of real output/ GDP above and below the tend rate of growth of an economy over time

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3
Q

Circular flow of income

A

The exchange of factors of production and money from firms and households in an economy

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4
Q

Multiplier effect

A

Increase in AD or spending is more than proportionate to increase in national income

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5
Q

Accelerator effect

A

Increase in economic growth (GDP) leads to a more than proportionate increase in investment

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6
Q

Unemployment

A

Those without a job and seeking work at the present wage rate

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7
Q

Define participation rates

A

Proportion if country’s population that makes up the labour force

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8
Q

Define demand pull inflation

A

Where AD exceeds AS leading to an increase in the level of prices

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9
Q

Define cost push inflation

A

Increased costs of production result in firms increasing their prices leading to an increase in the general price level

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10
Q

Define cyclical unemployment

A

Demand deficient unemployment that occurs as a result of the economic cycle

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11
Q

Define demand deficient unemployment

A

Insufficient AD in the economy to employ the available labour

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12
Q

What is frictional/search unemployment?

A

When people are between jobs

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13
Q

What is structural unemployment

A

Unemployment resulting from changing patterns of demand in the labour market not matching the skills and locations of those seeking work

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14
Q

Define voluntary unemployment

A

Workers who are not prepared to take a job at current wage levels

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15
Q

Define balance of payments

A

Exports minus imports

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16
Q

Define recession

A

Two successive quarters where change of economic growth is negative

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17
Q

What are the 4 indicators used to measure the macroeconomy

A

Economic Growth (GDP)
(Un)Employment
Inflation
Balance of payments (Net exports)

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18
Q

State difference between real GDP and nominal

A

Real takes into account inflation

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19
Q

Define negative output gap

A

Economy is producing less / lower real growth than the underlying trend output/ growth

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20
Q

Define positive output gap

A

When actual GDP / output exceeds trend GDP / output

Increasing inflationary pressure

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21
Q

Define fiscal policy

A

Government policies regarding adjusting taxation and/or governent expenditure

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22
Q

Define monetary policy

A

Controlling macroeconomy via changes in monetary variables such as money supply or interest rates

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23
Q

Define disposable income

A

Income available to households after the payment of income tax and national insurance contribution

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24
Q

Define injection

A

Money that originates outside the circular flow of income and so will increase national income/output/expenditure

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25
Q

Define withdrawal

A

Money not passed on in the circular flow and has the effect of reducing national income/output/expenditure

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26
Q

Define savings

A

A withdrawal from the circular flow

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27
Q

Define investment

A

Spending by firms on buildings, machinery and improving the skills of the labour force

28
Q

What is privatisation

A

Sale of government owned assets to the private sector

29
Q

Define Long Run Aggregate Supply

A

Economy’s productive capacity

30
Q

What is inflation

A

A persistent increase in the level of prices

31
Q

Define deflation

A

A persistent fall in the level of prices

32
Q

What is the credit crunch

A

Where borrowing becomes more expensive or unavailable

33
Q

What is a tight labour market

A

Where firms have to increase wages to attract the labour they require

34
Q

Define balance of trade

A

Visible exports minus visible imports

35
Q

Define visibles

A

Exports or imports that are tangible, you can see and touch as they cross international boundaries

36
Q

Define invisibles

A

Intangibles such as the provision of insurance or banking services

37
Q

Define deindustrialisation

A

Fall in proportion of national output accounted for by the manufacturing sector in the economy

38
Q

Define interest rates

A

The cost of borrowing money or the reward for saving money

39
Q

Define exchange rate

A

Price of exchanging one currency into another

40
Q

What is the difference between narrow and broad money

A

Narrow: physical notes and coins in circulation that is available for normal transactions
Broad: narrow money plus money that is held in banks and building societies but not immediately accessible

41
Q

Explain difference between current and capital spending

A

Current: govt spending on day-to-day running of public sector in sliding raw materials and wages of public sector workers
Capital: govt spending to improve productive capacity of nation including infrastructure, schools, hospitals

42
Q

Define budget deficit

A

Govt spending exceeds govt receipts/revenue in a financial year

43
Q

Define budget surplus

A

Govt receipts/ revenue exceeds govt spending in a financial year

44
Q

Explain difference between contractionary and expansionary policies

A

Expansionary: to increase AD - stimulate growth
Contractionary: to decrease AD - control growth/inflation

45
Q

What is deregulation

A

Process of removing govt controls from markets - helps enable more suppliers to enter a market

46
Q

Economic growth

A

Capacity of the economy to produce more goods and services over time

47
Q

Gross domestic product

A

Total value of the goods and services produced in an economy

48
Q

Trade off

A

One macro economic objective has to be curtailed in favour of another

49
Q

Import

A

Good or services purchased from abroad

50
Q

Exports

A

Goods or services sold abroad

51
Q

Employment

A

Where labour is actively engaged in a productive activity usually in exchange for payments such as wages

52
Q

Economic indicators

A

Economic statistics that provide information about the expansions and contractions of business cycles

53
Q

GDP per capita

A

GDP divided by the population - a measure of living standards

54
Q

Index numbers

A

A weighted average of a group of items compared to a base value of 100

55
Q

Weighting

A

Where a commodity is given a writhing proportional to it’s importance in the general pattern of consumer spending

56
Q

Economic models

A

Used to show essential characteristics of complicated economic conditions in order to analyse them and predict the result of changes in variables

57
Q

Stock

A

Quantity measured at a particular point in time

58
Q

Positive/ negative expectations

A

Businesses expect future sales and profits to improve/fall due to factors like increased/falling aggregate demand

59
Q

Keynesian

A

The view of the influential British economist John Maynard Keynes who suggested how govern beta could cure mass unemployment

60
Q

Classical view

A

Economists who believed that recessions and slumps would cure themselves

61
Q

Natural rate of unemployment

A

Rate of unemployment that is consistent with a stable rate of inflation

62
Q

Monetary policy committee

A

A committee of economists and central bankers who meet monthly and decide whether or not to change the rate of interest

63
Q

Boom/busy policy

A

Government using macroeconomic tools to stimulate and then contract the economy

64
Q

Total factor productivity

A

Overall productivity of inputs used by a firm in producing a particular level of output

65
Q

Discouraged workers

A

Workers who leave the labour market because despite numerous attempts they are unable to find a job

66
Q

Globalisation

A

Ability to produce goods anywhere in the world and sell them in any country

67
Q

Current account equilibrium

A

Where current account exercises no effect on domestic macroeconomy

AS Economics (2 decks)

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