Macroeconomic key terms Flashcards
(185 cards)
AAA credit rating
The best credit rating that can be given to a corporation’s or a government’s bonds, effectively indicating that the risk of default is negligible
Accelerator effect
Where planned capital investment is linked positively to the past and expected growth of consumer demand or national income
Aggregate supply shock
Either an inflation shock or a shock to potential national output; adverse aggregate supply shocks of both types reduce output and can increase the rate of inflation
Animal spirits
The state of confidence or pessimism held by consumers and businesses
Appreciation
A rise in the market value of one exchange rate against another
Austerity
Economic policy aimed at reducing a government’s deficit (or borrowing). Austerity can be achieved through increases in government spending - primarily via tax rises and/or a reduction in government spending or future spending commitments
Automatic stabilisers
Automatic fiscal changes as the economy moves through stages of the business/trade/economic cycle
Bank run
When a large number of people suspect that a bank may go bankrupt and withdraw their deposits. Bank runs are rare, one happened with the Northern Rock in 2007
Bond
Both companies and governments can issue bonds. The issue of new government debt is done by the central bank and involves selling debt to capital markets
Brain drain
The movement of highly skilled people from their own country to another nation
BRIC economies
The BRIC grouping - Brazil, Russia, India, China - shorthand for the rise of emerging markets. The BRICs have a bigger share of world trade than the USA
Bubble
When the prices of securities or other assets rise so sharply and at such a sustained rate that they exceed valuations justified by fundamentals, making a sudden collapse likely (at which point the bubble “bursts”)
Budget deficit
Occurs when government spending is greater than tax revenues. Reducing the deficit can be achieved by tax increases or cuts in government spending or a period of economic growth which brings about a rise in direct and indirect tax revenues
Business confidence
Expectations about the future of the economy -vital in influencing business decisions about how much to spend on new capital goods
Capacity utilisation
Measures how much of the productive potential of the economy is being used. Utilisation falls during a recession leading to a rise in spare capacity
Capital market
A stock or bond market where firms can raise money for investment purposes
Capital stock
The value of the total stock of capital inputs in the economy
Capital-labour substitution
Replacing workers with machines in a bid to increase productivity and reduce the unit cost of production. This can lead to structural unemployment
Claimant Count
The number of people claiming unemployment-related benefits
Closed economy
An economy operating without imports and exports - i.e. closed to global trade
Comparative advantage
Refers to the relative advantage that one country or producer has over another. Countries can benefit from specialising in and exporting the product(s) for which it has the lowest opportunity cost of supply
Constant prices
Constant prices tells us that the data has been inflation adjusted
Consumer confidence
Expectations about the future including interest rates, incomes and jobs
Consumer durables
Products such as washing machines that are not used up immediately when consumed and which provide a flow of services over time