Macroeconomic definitions Flashcards
Aggregate demand
The total demand for a country’s goods and services at a given price level and in a given time period
Price level
The average of each of the prices of all the products produced in an economy
Consumer expenditure
Spending by households on consumer products
investment
Spending on capital goods
Government spending
Spending by the central government and local government on goods and services
Exports
Products sold abroad
Imports
Products bought from abroad
Net exports
The value of exports minus the value of imports
Transfer payments
Money transferred from one person or group to another not in return for any good or service
Job seeker’s allowance
A benefit paid by the government to those unemployed and trying to find a job
Trade surplus
The value of exports exceeding the value of imports
Trade deficit
The value of imports exceeding the value of exports
Consumer confidence
How optimistic consumers are about future economic prospects
rate of interest
The charge for borrowing money and the amount paid for lending money
Average propensity to consume
The proportion of disposable income spent. It is consumer expenditure divided by disposable income
Net savers
People who save more than they borrow
Wealth
A stock of assets, e.g. property, shares and money held in a savings account
Distribution of income
How income is shared out between households in a country
Inflation
A sustained rise in the price level
Saving
Real disposable income minus spending
Average propensity to save
The proportion of disposable income saved. It is saving divided by disposable income
Target savers
People who save with a target figure in mind
Dissave
Spending more than disposable income
Savings ratio
Savings as a proportion of disposable income
Capacity utilisation
The extent to which firms are using their capital goods
Corporation tax
A tax on firms’ profits
Retained profits
Profit kept by firms to finance investment
Unit cost
Average cost per unit of output
Real GDP
The country’s output measured in constant prices and so adjusted for inflation
Gross Domestic Product
The total output of goods and services produced in a country within a specific time period
Exchange rate
The price of one currency in terms of another
Tariff
A tax on imports
Government bond
A financial asset issued by the central of local government as a means of borrowing money
Aggregate supply
The total amount that producers in an economy are willing and able to supply at a given price level in a given time period
Productivity
Output or production of a good or service per worker per unit of a factor of production in a given time period
Privatisation
Transfer of assets from the public to the private sector
Macroeconomic equilibrium
A situation where aggregate demand equals aggregate supply and real GDP is not changing
Circular flow of income
The movement of spending and income throughout the economy
Factor services
The services provided by the factors of production
Leakages
Withdrawals of possible spending from the secular flow of income
Injections
Additions of extra spending into the circular flow of income
Multiplier effect
The process by which any change in a component of aggregate demand results in a greater final change in real GDP
Overheating
The growth in aggregate demand outstripping the growth in aggregate supply, resulting in inflation
Output gap
The difference between an economy’s actual and potential real GDP
Tend Growth
The expected increase in potential output over time
Economic Growth (Short Run)
An increase in real GDP
Economic Growth (Long Run)
An increase in the productive capacity, that is, in the maximum output that an economy can produce
Unemployment
A situation where people are out of work but are willing and able to work
Labour force
The people who are employed and unemployed, that is, those who are economically active
Elastic
Responsive to a change in market condition
Inflation Rate
The percentage increase in the price level over a period of time
Sustainable economic growth
economic growth that can continue over time and does not endanger future generations’ ability to expand productive capacity
Tend Growth
The expected increase in potential output over time. It is a measure of how fast the economy can grow without generating inflation
Full employment
A situation where those wanting and able to work can find employment at the going wage rate
Current account deficit
When more money is leaving the country than entering it, as result of sales of its exports, income and current transfers from abroad being less than imports and income and current transfers going abroad.
Hyperinflation
An inflation rate above 50%
Nominal GDP
Output measured in current prices and so not adjusted for inflation
Labour productivity
Output per worker hour
Informal economy
economic activity that is not recorded or registered with the authorities in order to avoid paying tax or complying with regulations, or because the activity is illegal
Economy of sale
The advantage of producing on large scarlet, in the form of lower long-run average cost
Unemployment rate
The percentage of the labour force who are out of work
Labour Force Survey
A measure of unemployment based on a survey using the ILO definition of unemployment
Claimant count
A measure of unemployment that includes those receiving unemployment-related benefits
Consumer Price Index
A measure of changes in the price of a representative basket of consumer goods and services.
Retail Price Index
measure of inflation that is used for adjusting pensions and other benefits to take account of changes in inflation and frequently used in wage negotiations
Cyclical unemployment
Unemployment arising from a lack of aggregate demand
Structural unemployment
Unemployment caused by the decline of certain industries and occupations due to changes in demand and supply
Frictional unemployment
Short term unemployment occurring when workers are in-between jobs.
Demand pull inflation
Increases in the price level caused by increases in aggregate demand
cost push inflation
Increases in the price level caused by increases in the costs of production
Hysteresis
Unemployment causing unemployment
Long-term unemployment
Unemployment lasting for more than a year
Menu costs
The costs of changing prices due to inflation
Shoeleather costs
Costs in terms of the extra time and effort involved in reducing money holdings
Inflationary noise
The distortion of price signals caused by inflation
Real interest rate
The nominal interest rate minus the inflation rate
Fiscal drag
People’s income being dragged into higher tax bands as a result of tax brackets not being adjusted in line with inflation
Exchange rate
The price of one currency in terms of another currency or currencies
Fiscal policy
The taxation and spending decisions of a government
Monetary policy
Central bank and/or government decisions on the rate of interest, the money supply and the exchange rate
Supply side policies
Policies designed to increase aggregate supply by improving the efficiency of labour and product markets
reflationary
Of policy measures designed to increase aggregate demand
Deflationary
Of policy measures designed to reduce aggregate demand
Discretionary fiscal policy
Deliberate changes in government spending and taxation designed to influence aggregate demand.
Automatic stabilisers
Forms of government spending and taxation that change automatically to offset fluctuations in economic activity
Economic cycle
The tendency for economic activity to fluctuate outside its trend growth rate, moving from a high level of economic activity (boom) to negative economic growth (recession)
Progressive tax
A tax that takes a higher percentage from the income of the rich
Regressive tax
A tax that takes a greater percentage from the income of the poor
Recession
A fall In real GDP over a period of six months or more
Human capital
Education, training and experience that a worker, or group of workers , possesses.
Tariff
A tax on imports
Quota
A limit on imports
Occupational immobility of labour
Difficulty in moving from one type of job to another
Protectionism
The protection of domestic industries from foreign competition
Voluntary export restraint
A limit placed on imports from a country with the agreement of that country’s government
