Macroeconomics key words year 1 Flashcards
Accelerator.
A change in the level of investment in new capital goods is induced by a change in the rate of growth of national income or aggregate demand.
Actual Output.
Level of real output produced in the economy in a particular year, not to be confused with the trend level of output. The trend level of output is what economy is capable of producing when working at full capacity. Actual output differs from the trend level of output when there are output gaps.
Aggregate Demand.
The total planned spending on the real output produced within the economy.
Aggregate Supply.
The level of real national output that producers are prepared to supply on real at different average price levels.
Availability of Credit.
Funds available for households and firms to borrow.
Balance of Payments.
A record of all the currency flows into and out of a country in a particular time period.
Balance of Payments Equlibrium (or Current Account Equlibrium).
Occurs when the current account more or less balances over a period of years.
Balance of Trade.
The difference between the money value of a country’s imports and exports. Balance of Trade is the largest component of a country’s balance of payments on current account.
Balance of Trade Deficit.
When the money value of a country’s imports exceeds the money value of its exports.
Balance of Trade in Goods.
The part of the current account measuring payments for exports and imports of goods. The difference between the total value of exports and the total value of imports of goods is sometimes called the ‘balance of visible trade’.
Balance of Trade in Services.
Is part of the current account and is the difference between the payments for the exports of services and the payments for the import of services.
Balance of Trade Surplus.
When the money value of a country’s exports exceeds the money value of its imports.
Balanced Budget.
Achieved when government spending equals government revenue.
Bank of England.
The central bank in the UK economy which is in charge of monetary policy.
Bank Rate.
The rate of interest the Bank of England pays to commercial banks on their deposits held at the Bank of England.
Budget Deficit.
Occurs when government spending exceeds government revenue (G > T). This represents a net injection of demand into the circular flow of income and hence a budget deficit is expansionary.
Budget Surplus.
Occurs when government spending is less than government revenue (G < T). This represents a net withdrawal from the circular flow of income and hence a budget surplus is contractionary.
Central Bank.
Controls the Banking system and implements monetary policy on behalf of the government.
Certainty.
One of the principles of taxation. Taxpayers should be reasonably certain the amount of tax they will be expected to pay.
Claimant Count.
The method of measuring unemployment according to those people who are claiming unemployment-related benefits.
Closed Economy.
An economy with no international trade.
Consumer Price Index (CPI).
The official measure used to calculate the rate of consumer price inflation in the UK. The CPI calculates the average price increase of a basket of 700 different consumer goods and services.
Consumption.
Total planned spending by households on consumer goods and services produced within the economy.
Contractionary Fiscal Policy.
Uses fiscal policy to decrease aggregate demand and to shift AD to the left.
Contractionary Monetary Policy.
Uses higher interest rates and other monetary tools to decrease aggregate demand and to shift the AD curve to the left.
Convenience.
The principle of taxation which requires a tax to be convenient for taxpayers to pay.
Cost-Push Inflation (Cost Inflation).
A rising price level caused by an increase in the costs of production, shown by a shift of the SRAS curve to the left.
Credit Crunch.
Occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to obtain financing and leads to a rise in the cost of borrowing.
Crowding Out.
A situation in which an increase in government or public spending displaces private sector spending, with little or no increase in aggregate demand.
Current Account Deficit
Occurs when currency outflows in the current account exceed currency inflows. It is often shortened to ‘exports less than imports’.
Current Account of the Balance of Payments.
Measures all the currency flows into and out of a country in a particular time period in payments for exports and imports, together with income and transfer flows (primary Income and secondary income flows).
Current Account Surplus.
Occurs when currency inflows in the current account exceed currency outflows. It is often shortened to ‘exports greater than imports’.
Cyclical Budget Deficit.
The part of the budget deficit which rises in the downswing of the economic cycle and falls in the upswing of the cycle.
Cyclical Budget Surplus.
If the structural deficit were zero, a cyclical surplus would probably emerge in the upswing of the economic cycle.
Cyclical Unemployment (Keynesian Unemployment) (Demand Deficient Unemployment).
As the latter name suggests’ it is unemployment caused by a lack of aggregate demand in the economy and occurs when the economy goes into a recession or depression.
Deficit Financing.
Deliberately running a budget deficit and borrowing to finance the deficit.
Deflation.
A persistent or continuing fall in the average price level.
Deindustrialisation.
The decline of manufacturing industries, together with coal mining.
Demand Side
Relates to the impact of changes in aggregate demand on the economy. Associated with Keynesian economics.
Demand-Pull Inflation (Demand Inflation).
A rising price level caused by an increase in aggregate demand, shown by a shift of the AD curve to the right.
Demand-Side Fiscal Policy.
Used to increase or decrease the level of aggregate demand (and to shift the AD curve right or left) Through changes in government spending, taxation, and the budget balance.
Deregulation.
Involves removing previously imposed regulations. it is the opposite of regulation.
Direct Tax.
A tax which cannot be shifted by the person legally liable to pay the tax onto someone else. Direct taxes are levied on income and wealth.
Discretionary Fiscal Policy.
Involves making discrete changes to G, T and the budget deficit to manage the level of aggregate demand.
Disinflation.
When the rate of inflation is falling but still positive and the price level is rising more slowly than predicted.
Distribution of Income.
The spread of different incomes among individuals and different income groups in the economy.
Economic Cycle (Business Cycle) (Trade Cycle).
Upswing and downswing in aggregate economic activity taking place over 4 to 12 years.
Economic Performance.
Success or failure in achieving economic goals.
Economic Recovery.
When short-run economic growth takes place after a recession.
Economic Shock.
An unexpected event hitting the economy. Economic shocks can be demand side or supply side (and sometimes both) and unfavorable or favorable.
Economy.
The principle of taxation which requires a tax to be cheap to collect in relation to the revenue it yields.
Efficiency (as a Principle of Taxation).
A tax should achieve its desired objective(s) with minimum unintended consequences.
Emerging-Market Country.
A country that is progressing towards becoming more economically advanced, by means of rapid growth and deindustrialization.
Equation of Exchange.
The stock of money in the economy multiplied by the velocity of circulation of money equals the price level multiplied by the quantity of real output in the economy. (MV=PQ)
Equilibrium Unemployment.
Exists when the economy’s aggregate labor market is in equilibrium. It is the same as the natural level of unemployment.
Equilibrium National Income (Macroeconomic Equilibrium)
The level of real output at which aggregate demand equals aggregate supply (AD=AS). Alternatively, it is the level of income at which withdrawals from the circular flow of income equal injections into the flow.
Equity (As a Principal of Taxation).
Requires a tax to be fair.
Exchange Rate.
The price of a currency, E.G The pound, measured in terms of another currency such as the US dollar or the euro.
Expansionary Monetary Policy.
Uses lower interest rates and other monetary instruments, such as quantitative easing to increase aggregate demand to shift the AD curve to the right.
Expansionary Fiscal Policy.
Uses fiscal policy to increase aggregate demand and to shift the AD curve to the right.
Export-Led Growth.
In the short run, economic growth resulting from the increase in exports as a component of aggregated demand. In the long run, economic growth resulting from the growth and increased international competitiveness of exporting industries.
