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IB economics > Macroeconomics terms > Flashcards

Macroeconomics terms Flashcards

1
Q

national output

A

total output of the economy

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2
Q

potential output

A

long-term growth trend of GDP, full employment GDP

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3
Q

recession

A

economic contraction that lasts for longer than six months

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4
Q

natural rate of unemployment

A

unemployment that occurs when the economy is producing at its full employment level of output, equal to sum of structural, frictional and seasonal uenmployment

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5
Q

aggregate demand

A

total amount of real output (real GDP) that consumers, firms, the government and foreigners want to buy at each possible price level, over a particular time period

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6
Q

consumer confidence

A

measure of how optimistic consumers are about their future income and future of the economy

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7
Q

wealth

A

value of all assets that people own minus debt to banks and other financial institutions

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8
Q

income taxes

A

taxes paid by households on their income

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9
Q

business confidence

A

measure of how optimistic firms are about their future sales and economic activity

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10
Q

corporate indebtness

A

the degree to which firms have debts

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11
Q

aggregate supply

A

the total quantity of goods and services produced in an economy over a particular time period at different price levels

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12
Q

SRAS curve

A

relationship between the price level and the quantity of the real output produced by firms when resource prices do not change, ceteris paribus

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13
Q

LRAS curve

A

relationship between real GDP and the price level when resource prices change to reflect changes in price level, ceteris paribus

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14
Q

deflationary gap

A

short-run equilibrium position where real GDP is less than potential GDP

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15
Q

inflationary gap

A

long-run equilibrium position where real GDP is greater than potential GDP

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16
Q

structural unemployment

A

unemployment that occurs as a result of technological changes, changing patterns of demand, market rigidities, and changes in geographical location of the jobs

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17
Q

frictional unemployment

A

unemployment that occurs when workers are in between jobs

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18
Q

seasonal unemployment

A

unemployment that occurs when the demand for labour in certain industries changes on a seasonal bases

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19
Q

cyclical unemployment

A

occurs when the economy is in a recessionary gap, demand-deficient unemployment

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20
Q

inflation

A

sustained increase in general price level

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21
Q

deflation

A

sustained decrease in general price level

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22
Q

disinflation

A

fall in the inflation rate

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23
Q

weighted price index

A

price index that weights the various goods and services according to their relative importance

24
Q

demand-pull inflation

A

caused by an increase in aggregate demand

25
Q

cost-push inflation

A

caused by a fall in aggregate supply due to increased production costs

26
Q

deferred consumption

A

consumer postponing their spendings

27
Q

Phillips curve

A

curve showing relationship between unemployment and inflation

28
Q

government debt

A

national debt, amount of money government owes to lenders outside the government itself

29
Q

sustainable debt

A

level of debt where the government has enough revenues to meet its debt obligations (repayment+interest)

30
Q

debt servicing

A

necessary payments to repay the principal plus interest payment

31
Q

demand-side policies

A

policies that attempt to change aggregate demand to achieve goals of price stability, full employment, and economic growth, and minimize the severity of the business life cycle

32
Q

supply-side policies

A

policies that focus on aggregate supply, namely on factors aiming to increase long-run aggregate supply to achieve long-term economic growth

33
Q

monetary policy

A

policy carried out by the central bank, aiming to change the interest rates in order to influence the aggregate demand

34
Q

commercial banks

A

finantial institutions whose main functions are to hold deposits, make loans, transfer funds by check, buy government bonds, their customers are firms and individual consumers (banker to individual consumers and firms)

35
Q

central bank

A

financial institution responsible for the country’s financial system and commercial banks, and carrying out monetary policy (banker to commercial banks and to the government

36
Q

inflation targeting

A

monetary policy focused on achieving a particular inflation target instead of goals of low rate of inflation and unemployment

37
Q

money creation

A

process in which commercial banks create new money by making loans

38
Q

open market operations

A

tool of monetary policy whereby the central bank buys and sells bonds to commercial banks to influence the money supply and interest rate

39
Q

minimum lending rate

A

interest rate charged by the central bank when it lends funds to commercial banks

40
Q

quantitative easing

A

tool used by central banks which involves buying bonds and other types of financial assets on a large scale to increase the money supply in the economy as part of expansionary monetary policy

41
Q

real rate of interest

A

nominal interset rate minus rate of inflation

42
Q

expansionary monetary policy

A

policy pursued in economic contraction, involving a decrease in interest rates to increase investment and consumption spending

43
Q

contractionary monetary policy

A

policy usually pursued when the economy is in an inflationary gap, involving an increase in interest rates to decrease investment and consumption spending

44
Q

fiscal policy

A

manipulations by the government of its own expenditures and taxes in order to influence the level of aggregate demand

45
Q

expansionary fiscal policy

A

policy usually pursued in economic contraction, involving an increase in government spending or decrease in taxes or both to increase aggregate demand

46
Q

contractionary fiscal policy

A

policy usually pursued when the economy is in inflationary gap, involving a decrease in government spending and increase in taxes or both to decrease aggregate demand

47
Q

crowding out

A

phenomenon in which government spending financed by borrowing might result in higher interest rates which could reduce private sector spending thus reversing the impact of the expansionary fiscal policy

48
Q

automatic stabilisers

A

factors that automatically, without any action by the government, work towards stabilising the economy by reducing short term fluctuations of the business cycle

49
Q

Keynesian multiplier

A

ratio of change in real GDP divided by the initial change in expenditure

50
Q

MPC

A

marginal prosperity to consume, a fraction of income households spend on consumption

51
Q

market-based supply-side policies

A

policies based on promoting well-functioning, competitive markets in order to increase potential output and achieve long-term economic grwoth

52
Q

privatisation

A

transfer of ownership of firm from the public to the private sector

53
Q

deregulation

A

elimination or reduction of government regulation of private sector activities

54
Q

incentive-related policies

A

policies involving reduction of various types of taxes to change the incentives faced by the taxpayers

55
Q

interventionist supply-side policies

A

policy based on government intervention in the market to increase the potential output and achieve long-term economic growth

56
Q

industrial policies

A

policies designed to support the growth of the industrial sector of the economy

IB economics (9 decks)

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