Th2: Definitions 4 Flashcards
Marginal propensity to withdraw
the proportion of an increase in income that is withdrawn from the circular flow
Market-based supply side policies
policies which are designed to remove anything which prevents the free market system working efficiently
Monetary policy
the attempts of the central bank / regulatory authority to control the level of aggregate demand by altering base interest rates or the amount of money in the economy
Monetary Policy Committee (MPC)
9 economists who meet monthly to set the Bank rate as well as other monetary instruments
Monetary supply
stock of money in the economy
Multiplier
an increase in an injection will lead to an even greater increase of national income
1 1
——- = ———–
MPW (1-MPC)
National expenditure
the value of spending by households on goods and services
National income
the value of income paid by firms to households in return for land, labour, capital and enterprise
National output
the value of the flow of goods and services from firms to households
Negative output gap
when GDP is lower than predicted - the economy is producing below full output
Net exports
exports minus imports
Net investment
investment adjusted for depreciation - gross investment minus depreciation
Nominal GDP
GDP which does not take inflation into account - GDP at current prices
Output gap
the difference between the long term trend rate of growth and actual growth
Positive output gap
when GDP is higher than predicted - the economy is producing above full output
