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Economics > Macroeconomics > Flashcards

Macroeconomics Flashcards

1
Q

Accelerator Effect

A

Relationship between the change in new investment and the rate of change in national income.

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2
Q

Aggregate Demand

A

Total planned expenditure in the economy, C+I+G+(X-M)

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3
Q

Aggregate Supply

A

Total value of goods and services supplied in the economy.

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4
Q

Balance of Payments

A

A record of a country’s international transactions over a year.

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5
Q

Balance of Trade

A

Visible exports minus Visible imports

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6
Q

Balanced Budget

A

Where Government Receipts = Government Spending in a fiscal year.

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7
Q

Bank rate

A

Interest rate set by the Bank of England.

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8
Q

Bonds

A

Financial securities sold by companies or governments. They have a maturity date at which they are redeemed, with the borrower usually making a fixed interest payment each year (coupon) until maturity

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9
Q

Boom

A

Period of above average short run economic growth.

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10
Q

Broad Money

A

Money held in Banks and Building Societies that is not immediately accessible.

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11
Q

Budget Deficit

A

Where Government Spending exceeds Government Receipts in a fiscal year

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12
Q

Budget Surplus

A

Where Government Receipts exceed Government Spending in a fiscal year

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13
Q

Central bank

A

Financial Institution typically responsible for setting short-term interest rates and issuing notes and coins.

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14
Q

Circular Flow of Income

A

Model explaining the equilibrium level of national income

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15
Q

Claimant Count

A

A measure of unemployment of the number of people claiming unemployment benefits.

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16
Q

Consumption (C)

A

Spending by domestic households on goods and services.

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17
Q

Cost-push Inflation

A

Where increased costs of production result in firms increasing prices, leading to an increase in the general price level.

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18
Q

CPI

A

Consumer Price Index. Target Measure for inflation by the MPC of the Bank of England.

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19
Q

Credit Crunch

A

When borrowing becomes more expensive or unavailable.

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20
Q

Current Account

A

Part of the Balance of Payments which looks at the net income flows from trade in goods/services or the reward from investments located overseas.

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21
Q

Current Account Deficit

A

Where flows of money from trade and other incomes out of the country are greater than the equivalent flows into the country.

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22
Q

Cyclical Unemployment

A

Demand-deficient unemployment that results from a downturn in the economic cycle.

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23
Q

Deflation

A

When there is a constant fall in the general price level of goods and services.

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24
Q

Deindustrialisation

A

A fall in the proportion of national output due to the loss of the manufacturing sector of the economy.

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25
Q

Demand Management

A

Using Monetary and Fiscal Policy to control Aggregate Demand to minimise fluctuations in the economic cycle.

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26
Q

Demand-pull Inflation

A

Where AD exceeds AS leading to an increase in the price level

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27
Q

Demand-side Shock

A

Unexpected and significant changes in the level of AD

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28
Q

Deregulation

A

Process of removing Government controls from markets

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29
Q

Direct Tax

A

A tax on an individual/firm’s income or wealth

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30
Q

Disinflation

A

Where the rate of inflation is still positive

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31
Q

Discretionary Fiscal Policy

A

Deliberate manipulation of government spending and taxation to influence the economy

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32
Q

Disposable Income

A

Income available to spend after the payment of income tax and national insurance contributions.

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33
Q

Downturn

A

Period of the economic cycle where short-run economic growth falls from above average to below average.

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34
Q

Economic Cycle

A

Tendency for economic growth to fluctuate over time

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35
Q

Economic Growth

A

Increase in national income (SR). Increase in the productive capacity of the economy (LR).

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36
Q

Economic Shock

A

Unexpected event that significantly impacts the macroeconomy

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37
Q

Exchange Rate

A

Price of one currency in terms of another currency

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38
Q

Exports

A

Goods or services sold abroad

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39
Q

Fiscal Policy

A

Use of Government Spending and taxation to control the demand-side of the economy

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40
Q

Frictional Unemployment

A

Unemployment due to moving between jobs

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41
Q

Full employment

A

Level of employment where all economically active are able to find work at the current wage rate

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42
Q

GDP

A

Gross Domestic Product is the Total value of goods and services produced in the economy

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43
Q

Globalisation

A

Increasing interdependence and integration of world economies

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44
Q

Government Spending/Expenditure

A

Spending by the Government on current and capital items at both local and national level

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45
Q

Hot Money

A

Money that is liable to rapid transfer between countries

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46
Q

Human Capital

A

Skills, abilities, knowledge and motivation of labour

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47
Q

Imports

A

Goods and services purchased from abroad

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48
Q

Income

A

Flow of Income to a factor of production over a period of time

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49
Q

Index number

A

A number designed to be used to show the percentage changes in a variable over time, where 100 is the value of the base period

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50
Q

Inflation

A

Persistent rise in the general price level of goods and services

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51
Q

Inflation Rate

A

Percentage change in the price level measured over 1 year

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52
Q

Injection

A

Money that enters the circular flow of income and boosts national income

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53
Q

Interest rate

A

Cost of borrowing and the reward for saving

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54
Q

Investment

A

Spending by firms on capital equipment

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55
Q

Labour Force

A

Those of working age who are in work or actively seeking work

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56
Q

Macroeconomic equilibrium

A

Level of national income where there is no tendency for it to rise or fall

57
Q

Macroeconomic Objective

A

A target the government aims to achieve for the economy as a whole

58
Q

Macroeconomics

A

Study of the economy as a whole

59
Q

Monetary Policy

A

Controlling the economy through changes in interest rates and the money supply

60
Q

Mortgage

A

Loan to buy a property

61
Q

MPC

A

Monetary Policy Committee of the Bank of England, made up of economists and bankers, meet monthly to decide on changing the base rate of interest

62
Q

Money Supply

A

Total stock of liquid assets in an economy

63
Q

Multiplier effect

A

Where a change in spending leads to a proportionately greater change in national income

64
Q

Narrow Money

A

Notes, coins and balances available for current transactions

65
Q

National Debt

A

Stock of all outstanding government debt that has yet to be repaid

66
Q

National Income

A

Total income generated within an economy over a period of time

67
Q

Negative equity

A

Situation where the value of a property is lower than the outstanding mortgage

68
Q

Negative Output Gap

A

When the economy is below its trend rate of growth

69
Q

Nominal

A

Not adjusted for inflation

70
Q

Output Gap

A

Difference between actual growth and trend growth

71
Q

Participation rate

A

Proportion of the country’s working age population that makes up the labour force

72
Q

Policy Conflict

A

Where attempts to achieve one macroeconomic objective involves a trade-off with another objective

73
Q

Positive Output Gap

A

When actual GDP growth exceeds the trend rate of growth, increasing inflationary pressure

74
Q

Price level

A

Average level of prices of a range of goods and services at a point in time

75
Q

Primary Income

A

Flows of income from investments abroad minus flows of income from foreign investments in the UK

76
Q

Privatisation

A

Sale of government owned assets to the private sector

77
Q

Progressive Tax

A

Where those on higher incomes pay a higher proportion of their income in tax compared to those on lower incomes

78
Q

Proportional Tax

A

Where everyone pays the same proportion of their income in tax

79
Q

Real GDP

A

GDP adjusted for inflation

80
Q

Recession

A

2 or more consecutive quarters of negative economic growth

81
Q

Recovery

A

When short-run economic growth starts to increase after a recession

82
Q

Regressive Tax

A

Where those on lower incomes pay a higher proportion of their income in tax compared to those on higher incomes

83
Q

Secondary Income

A

Transfers of money received in the UK from abroad

84
Q

Structural Unemployment

A

Unemployment caused by a change in the pattern of demand in an economy

85
Q

Subsidy

A

A payment made by the government to producers to encourage greater production of a good or service

86
Q

Supply-side Improvements

A

Increase in an economy’s productive capacity due improved efficiency

87
Q

Supply-side Policies

A

Range of measures designed to increase AS by increasing efficiency of markets

88
Q

Supply-side Shock

A

Unexpected and significant changes in the price/availability of factors of production

89
Q

Tariff

A

Tax on imports

90
Q

Transmission Mechanism

A

How changes in the bank rate influence components of AD

91
Q

Unemployment

A

Those of working age who are willing and able to work at the given wage rate are unable to find work

92
Q

Unemployment rate

A

Percentage of the labour force that are currently unemployed

93
Q

Benefits Trap

A

Where individuals receive more in benefits than from an income in employment

94
Q

Voluntary Unemployment

A

Workers are not willing to take a job at the given wage rates

95
Q

Wealth

A

A stock of owned assets

96
Q

Wealth Effect

A

Where a rise in the value of household wealth encourages consumers to spend more and save less

97
Q

Withdrawals

A

Money taken out of the circular flow of income which reduces national income

98
Q

Absolute Advantage

A

A firm or country has the ability to output the largest amount of a product with its factors of production

99
Q

Automatic Stabiliser

A

Feature of fiscal approach which helps minimise fluctuations in AD without deliberate action

100
Q

Capital Ratio

A

Amount of capital on a bank’s balance sheet as a proportion of its loans

101
Q

Common External Tariff

A

A unified tax on imports into a customs union

102
Q

Classical Unemployment

A

Real wage unemployment. Due to real wages being above equilibrium level

103
Q

Commercial Bank

A

Financial institution which aims to make profits by selling banking services

104
Q

Common Market

A

Group of countries with no barriers to capital and labour mobility

105
Q

Comparative Advantage

A

When a firm or country can produce a product at a lower opportunity cost than another firm or country

106
Q

Convergence criteria

A

Macroeconomic conditions that must be met before a country can join an Economic and Monetary Union

107
Q

Coupon

A

Guaranteed fixed annual interest payment to a holder of a bond

108
Q

Credit

A

When a bank makes a loan (advance), it creates an asset on the bank’s balance sheet. A deposit, which is a liability of the bank

109
Q

Customs Union

A

A group of countries without trade barriers between members, but a common external tariff against imports from non-members

110
Q

Deflationary Policy

A

Policies to reduce AD

111
Q

Depreciation

A

A fall in the value of a currency in a floating exchange rate system

112
Q

Devaluation

A

A fall in the value of a currency in a fixed exchange rate system

113
Q

Development Indicators

A

GDP per capita, distribution of income, mortality rates, HDI

114
Q

Effective exchange rate

A

Exchange rate of a currency measured against a weighted average of the currencies of its major trading partners

115
Q

Economic and Monetary Union

A

A group of countries in a common market adopt a single currency and a single monetary policy

116
Q

Economic Development

A

Improvements in economic well-being and quality of life by adopting new technology and moving to an industry-based economy

117
Q

Foreign Direct Investment

A

Investment in physical capital abroad by MNCs

118
Q

Financial Account

A

Part of the balance of payments which records capital flows into and out of an economy

119
Q

Financial Conduct Authority

A

Responsible for macropreudential regulation- ensuring financial markets work well

120
Q

Financial Policy Committee

A

FPC, part of BoE that identifies, monitors and takes action to remove or reduce systemic risk

121
Q

Fiscal drag

A

Effect of inflation which increases the tax burden in a progressive tax system as people are pushed into higher tax brackets

122
Q

Fiscal boost

A

Effect of inflation to reduce the real burden of unit taxes over time

123
Q

Funding for Lending Scheme

A

Incentives to banks and buildings societies to expand lending to firms

124
Q

Forward Guidance

A

Attempts by BoE to send signals to market participants about the likely future path of interest rates to reduce uncertainty

125
Q

Free trade area

A

Group of countries that coordinate a removal of trade barriers between members, but do not have a common external tariff

126
Q

Geographical immobility

A

Where workers find it difficult to move to areas with employment opportunities

127
Q

HDI

A

A development index based on life expectancy, education and GDP per capita

128
Q

Indirect tax

A

A tax on spending

129
Q

Infant Industry

A

Justification to protect newer domestic firms from foreign competition until they can achieve sufficient economies of scale to compete

130
Q

Investment Bank

A

A bank that offers financial advice to clients- e.g. looking to buy a company

131
Q

J curve effect

A

Devaluation of a currency worsens in the short term before long run elastic demand for exports and imports lead to an improvement

132
Q

Laffer curve

A

Diagram showing the relationship between average rate of income tax and tax revenue

133
Q

Liquidity

A

Ease at which an asset can be turned into spendable money without loss of value

134
Q

Liquidity ratio

A

Ratio of a bank’s cash and other liquid assets to its deposits

135
Q

Loanable funds

A

Determination of interest rates through demand and supply of money

136
Q

Marginal rate of tax

A

Proportion of an additional £ of income that is taxed

137
Q

Marshall-Lerner Condition

A

Sum of PED for exports and PED for imports must be greater than 1 for a currency devaluation to improve the balance of payments

138
Q

Maturity

A

Date at which the issuer of a fixed interest security pays back the face value to the holder

139
Q

MNC

A

A company with its headquarters in one country and operations in many other countries

Economics (20 decks)

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