Macroeconomics Definitions ✅ Flashcards
Define inflation.
The sustained increase in the general price level of goods and services over a period time
Define deflation.
The sustained decrease in the general price level of goods and services over a period of time
Define economic growth.
An increase in the real value of output in an economy measured by an increase in GDP over time
Define GDP.
The total money value of all finals goods and services produced in an economy (regardless of who owns the FOP) in a given time period, usually one year.
Define GNI.
The total money value of all final goods and services produced in an economy over a year (regardless of where the factors are located) plus net property income from abroad (interest, rent, dividends, profit).
Define unemployment.
People who are eligible for work and are actively looking for work, but are without a paid job
Define seasonal unemployment.
Equilibrium unemployment that occurs when people are out of work because the demand for their usual job changes on a seasonal basis, e.g. ski instructor in the summer.
Define frictional unemployment.
Equilibrium unemployment that occurs when people are between jobs, e.g. in the process of searching for another job/fresh graduates
Define structural unemployment
Equilibrium unemployment that occurs when the pattern of demand and production methods change in the long-term, so there is a permanent fall in the demand for a particular type of labor. There is mismatch between skills and the jobs available, e.g. changes in technology, geographical location
Define cyclical unemployment.
Disequilibrium unemployment that occurs when there is insufficient demand in the economy and wages do not fall to compensate for this.
Define absolute poverty.
People who live with income level less than the extreme poverty line, where basic physical needs cannot be met, e.g. food and shelter
Define relative poverty.
Comparative measure of poverty that compares the income of individuals with median incomes (e.g. lower than 50% of the average earnings for the country)
Define monetary policy.
A demand-side policy that uses changes in the money supply or interest rates to achieve economic objectives relating to inflation and unemployment.
Define fiscal policy.
A demand-side policy using changes in government spending and direct taxation to influence aggregate demand and achieve economic objectives relating to inflation and unemployment.
Define interventionist supply-side policies.
Relies on government intervention to stimulate aggregate supply, imposes policies to increase the quantity/quality of capital
Define market supply-side policies.
Policies to stimulate aggregate demand by reducing government intervention, using policies to encourage competition, labor market reforms, and incentive-related policies
Define aggregate demand.
The total spending in an economy consisting of consumption, investment, government expenditure, and net exports.
Define aggregate supply.
The total amount of domestic goods and services supplied by businesses and the government, including consumers goods and capital goods.
Define balance of payments
Record of the value of all the transactions between the residents of a country with the residents of all other countries over a given period of time.
Define balance of trade-in goods.
A measure of the revenue received from the exports of tangible (physical) goods minus the expenditure on the imports of tangible goods over a given period of time
Define balance of trade-in services.
A measure of the revenue received from the exports of services minus the expenditure on the imports of services over a given period of time.
Define budget deficit.
When planned government spending exceeds planned government revenue.
Define business cycle.
Shows the periodic/cyclical fluctuations in economic activity. The business cycle shows that economics typically move through a pattern of economic growth with the phases: recovery, boom, slowdown, recession.
Define capital.
The factor of production that comes from investment in physical and human capital. Physical: stock of manufactured resources e.g. roads; Human: value of the workforce e.g. education
Define capital account.
A measure of the buying and selling of assets between countries. Assets include those that represent ownership and lending.
Define capital transfers.
A measure of net monetary movements gained or lost through actions such as the transfer of goods and financial assets by migrants entering or leaving the country, or transfers relating to the sale of gift taxes, inheritance taxes, and death duties.
Define current account.
A measure of the flow of funds from trade-in goods and services, plus net investment income flows (profit, interest, dividends) and net transfer of money (foreign aid, grants, remittances).
Define current account deficit.
When revenue from the exports of goods and services and income flows is less than the expenditure on the import of goods and services and income flows in a given year.
Define current account surplus.
When revenue from the export of goods and services and income flows is greater than the expenditure on the import of goods and services and income flows in a given year.
Define current transfers.
These are recorded in the balance of payments whenever an economy receives goods, services, income, or financial items without something in return. All transfers not considered to be capital are current.
Define deflationary/recessionary gap.
When total spending (AD) is less than the full employment level of output (LRAS), thus causing unemployment.
Define deregulation.
A type of market-based supply-side policy where the government reduces the number or type of regulations governing the behavior of firms.
Define government (national) debt.
The total outstanding borrowing of a government, made up of internal debt (owing to national creditors) and external debt (owing to foreign creditors).
Define indirect taxes.
Taxes on expenditure that are added to the selling price of a good or service
Define inflationary gap.
When total spending (AD) is greater than the full employment level of output (LRAS), causing inflation.
Define LRAS.
Aggregate supply that is dependent upon the resources in the economy, and can only be increased by improvements in the quantity/quality of FOP.
Define natural rate of unemployment.
The rate of unemployment that is consistent with a stable rate of inflation, including frictional, seasonal, and structural.
Define privatization.
A type of market-based supply-side policy where the government sells public assets to the private sector.
Define real GDP.
The total money value of all final goods and services produced in an economy in a given time period, usually one year, adjusted for inflation.
Define remittances.
The transfer of money by foreign workers to individuals, often family members, in their home country
Define SRAS.
Aggregate supply that varies with the level of demand for goods and services, shifted by changes in the costs of FOP.
Define supply-side policies.
Government policies designed to shift the LRAS to the right, thus increasing potential output in the economy.
