Macroeconomics Bookelt Three Flashcards
Anticipated inflation
Inflation which economics agents are expecting and for which they have planned
Automatic stabiliser
When a change in one variable automatically leads to an opposing change in another
Balanced budget
A situation where the government’s spending for a given period equals its receipts
Bank Rate or base rate
Interest rate set by the Bank of England which influences other interest rates across the U.K economy
Benign deflation
A fall in the general price level which is caused by falling costs and which acts as a boost to real incomes
Budget surplus
A situation where the government receives more in tax revenue than it spends
Classical or real-wage unemployment
Unemployment caused by real wages being too high (i.e. above the market-clearing wage rate)
Contractionary policy
Government policy designed to reduce aggregate demand usually to combat demand-pull inflation
Core inflation
The rate of inflation excluding price changes from more volatile items such as fuel and food
Cost-push inflation
Inflation caused by rising costs of production (shifting SRAS to the left)
Counter-cyclical policy
Macroeconomics policy designed to work against the business cycle (i.e. expansionary policy during a recession or contractionary policy during an economic boom)
Current account deficit
When the currency outflows from a country’s current account exceed the current inflows
Current account surplus
When the currency inflows into a country’s current account exceed the currency outflows
Cyclical unemployment
Unemployment caused by a lack of aggregate demand
Deflation
A sustained decrease in the general level of prices
Demand-pull inflation
Inflation caused by an increase in aggregate demand
Direct tax
A tax on income such as wages/salaries on profit
Discretionary fiscal policy
A conscious decision by the government to change its fiscal policy, e.g. by cutting income tax or reducing government spending on defence
Disinflation
A fall in the rate of inflation
Economically active
People who are willing to work at the current wage rate
Economically inactive
People who are unwilling to work at the current wage rate or unable to
Exchange rate
The value of one currency expressed in terms of another currency
Expansionary policy
Government policy designed to promote economic growth by increasing aggregate demand
External shock
An unexpected event with origins outside of a country
Fiscal loosening
Expansionary fiscal policy
Fiscal policy
Macroeconomics policy based on the control of taxation and government spending
Fiscal tightening
Contractionary fiscal policy
Fixed interest rates
Interest rates which do not change for the duration of a loan
Free-market supply-side policies
Policies designed to increase the economy’s productive capacity by reducing government involvement
Frictional unemployment
Workers who are currently between jobs due to the time taken to find a suitable vacancy
Geographical immobility of labour
When workers find it difficult to relocate e.g. due to family and social ties or the housing market
Hyperinflation
A very high rate of inflation, typically in excess of 100% per year
Indirect tax
A tax on expenditure, levied on goods and services
Inflation
A sustained increase in the general level of prices
Interest
The reward for saving and the cost of borrowing
Interest rate
The return of savings or borrowing expressed as a percentage
Inter-generational equity
Fairness between different generations
Internal shocks
An unexpected event with origins within a country
Interventionist supply-side policies
Policies designed to increase the economy’s productive capacity through greater government intervention
Long-run economic growth
An increase in an economy’s real gross domestic product caused by an increase in productive capacity
Malign deflation
A fall in the general price level caused by falling aggregate demand
Monetary policy
Macroeconomics policy based on the control of interest rates, the money supply (e.g. quantitative easing) and exchange rates
National debt
The stock of outstanding debt owed by a country’s government
Occupational immobility of labour
The difficulty workers have in changing jobs due to a lack of transferable skills
Output gap
The difference between the current level of output in an economy and its long run productive capacity
Pro-cyclical policy
Macroeconomics policy designed to work in line with the business cycle (i.e. expansionary policy during a period of growth or contractionary policy during a period of recession
Progressive tax
A tax that will take a higher proportion of high earners’ income
Proportionate tax
A tax that will take an equal proportion of everybody’s income
