Macroeconomics Flashcards
National income
Income obtained by a country’s residents, regardless of where they are
National outpu
sum total of all goods and services added together over a period of time
National expenditure
aggregate of all spending in an economy over a year
GDP
total market value of all goods and services produced in a country over a given period of time
GNP
sum total of all final goods and services produced in a country over a given period of time
NNP
GNP adjusted for depreciation
Depreciation
Wearing out of capital goods
Factor prices
cost of all factors of production used in the production process before the adjustment for taxes and subsidies
Real national income
adjusted for inflation
Per capita
per head
Absolute poverty
income falls below that required for minimum consumption
Relative poverty
situation where individuals do not have access to the same living standards as enjoyed by the average person
Aggregate demand
sum total of all goods and services produced in an economy over a given period
Price level
average of all prices
Aggregate supply
total supply of goods and services of the economy
Short run
prices of final goods and services can change but factor prices do not
Long run
factor prices do adjust to final price changes in macro economy
Natural rate of employment
no cyclical unemployment
Short run aggregate supply
the period of time before factor prices adjust to a change in prices
long run aggregate supply
relationship between real output and the price level at full employment
business cycle
periodic fluctuations of national output around its long term trend
Demand side policies
government policy that attempts to alter the level of AD to complement government policy
Fiscal policy
policy regards the size and composition of government spending and revenue to influence the economic activity
Expansionary fiscal policy
increases government expenditure, leads to increased AD
Contractionary fiscal policy
cutting government spending and/or raising taxes
Budget Surplus
excess of central government tax receipts over its spending
Budget deficit
the excess of central government spending over its receipts
Automatic fiscal stabilizers
progressive tax system that automatically increase the rate of taxation as income rises and thus slows down the potential rise in AD
Discretionary fiscal policy
deliberate changes in tax rates and government spending to influence levels of AD
Monetary policy
Central banks control the rate of interest and exchange rate to influence AD
Supply side policies
improve supply-side potential of an economy
Crowding out
a situation where the government spending displaces private spendings
Full employment
a situation where everyone in the labour force is employed
underemployment
Those employed who are not working at their full potential or part time workers wanting to be full time workers
Unemployment
those of working age, actively looking for work but cannot find work
Unemployment rate
the number of unemployed expressed as a percentage of the labour force
Cyclical unemployment
unemployment caused by business cycle where the slowdown of economic activity with falling aggregate demand is the cause of unemployment
Frictional unemployment
a result of people inbetween jobs
Structural unemployment
change in the demand for skills. Mismatch between qualifications and skills
Seasonal unemployment
associated with jobs that have different demands at different times of the year
Real-wage unemployment
disequilibrium associated with industries or regions where the demand for labour is lower at certain times of the year
Inflation
the sustained upward movement in the average level of prices
Deflation
sustained reduction in the general level of prices
Price stability
when average level of prices does not move
Consumer price index
measures the change in purchasing a fixed basket of goods and services from one time period to another
Demand pull inflation
Inflation induced by a persistence of excess AD over AS
Cost push inflation
Situation in an economy where there is sustained prices rises because of production costs increasing
Phillips curve
strong inverse relationship between wage inflation and unemployment
Progressive
system of tax where the percentage paid in tax increase as income increases
Regressive
tax regime where the percentage of tax paid is lower
