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Economics definitions > Theme 2 > Flashcards

Theme 2 Flashcards

1
Q

actual economic growth

A

the rate of growth of real GDP in a period

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2
Q

aggregate demand

A

the total amount of spending on goods and services produced in an economy during a period of time

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3
Q

aggregate demand (AD) curve

A

the relationship between
the level of aggregate demand and the overall price level; it shows planned expenditure at any given possible overall price level

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4
Q

average propensity to consume

A

consume the proportion of income that households devote to consumption

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5
Q

balance of payments

A

a set of accounts showing the transactions conducted between residents of a country and the rest of the world

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6
Q

Bank of England

A

the UK’s central bank

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7
Q

bank rate

A

the interest rate that is set by the Monetary Policy Committee of the Bank of England in order to influence inflation

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8
Q

boom

A

the expansionary phase of the trade (business) cycle

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9
Q

capital account of the balance of payments

A

an account identifying transactions in (physical) capital between the residents of a country and the rest of the world

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10
Q

capital productivity

A

a measure of output per unit of capital

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11
Q

central bank

A

the banker to the government, performing a range of functions, which may include issue of coins and banknotes, acting as banker to commercial banks and regulating the financial system

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12
Q

circular flow of income, expenditure and output

A

a model of the economy which shows the movement of goods and services between households and firms and their corresponding payment in money terms

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13
Q

claimant count of unemployment

A

the number of people claiming the Jobseeker’s allowance each month

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14
Q

classical/monetarist school

A

economists who believed that the macroeconomy always adjusts rapidly to the who full employment level of output, and that monetary policy should be the prime instrument the economy

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15
Q

consumer price index (CPI)

A

a measure of the general level of prices in the UK, the rate of change of which has been used as the government’s inflation target since January 2004

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16
Q

consumption

A

total planned household spending

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17
Q

cost push inflation

A

inflation initiated by an increase in the costs faced by firms, arising on the supply side

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18
Q

CPIH

A

a version of the CPI that takes into account the housing costs of owner-occupiers and the council tax

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19
Q

current account of the balance of payments

A

an account identifying transactions in goods and services between the residents of a country and the rest of the world

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20
Q

cyclical unemployment

A

unemployment that arises during the downturn of the economic cycle, such as a recession

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21
Q

deflation

A

a fall in the average level of prices (negative inflation)

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22
Q

demand-deficient unemployment

A

unemployment that arises because of a deficiency of aggregate demand in the economy, so that the equilibrium level of output is below full employment

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23
Q

demand-pull inflation

A

inflation initiated by an increase in aggregate demand

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24
Q

depreciation (of capital equipment)

A

the fall in the value of capital goods due to wear and tear

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25
Q

discouraged workers

A

people who have been unable to find employment and who are no longer looking for work

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26
Q

disinflation

A

a fall in the rate of inflation

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27
Q

disposable income

A

the income that households have to devote to consumption and saving, taking into account payments of direct taxes and transfer payments

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28
Q

Easterlin paradox

A

the hypothesis that happiness increases with average incomes, but only up to a point

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29
Q

economically inactive

A

those people of working age who are not looking for work, for a variety of reasons

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30
Q

exchange rate

A

the price of one currency in terms of another

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31
Q

export-led growth

A

a strategy for achieving rapid economic growth through the promotion of export activity

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32
Q

financial account of the balance of payments

A

an account identifying transactions in financial assets between the residents of a country and the rest of the world

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33
Q

fiscal policy

A

decisions made by the government on its expenditure, taxation and borrowing

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34
Q

frictional unemployment

A

unemployment associated with job search (i.e. people who are between jobs)

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35
Q

full employment

A

a situation where people who are economically active in the workforce and are willing and able to work (at going wage rates) are able to find employment

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36
Q

GNI per capita

A

the average level of GNI per head of population

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37
Q

government budget deficit (surplus)

A

the balance between government expenditure and revenue

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38
Q

gross domestic product (GDP)

A

a measure of the economic activity carried out in the domestic economy over a period

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39
Q

gross investment

A

net investment plus depreciation

40
Q

gross national income (GNI)

A

GDP plus net income from abroad

41
Q

human capital

A

the stock of skills and expertise that contribute to a worker’s productivity; it can be increased through education and training

42
Q

ILO unemployment rate

A

a measure of the percentage of

the workforce who are without jobs, but are available for work, willing to work and looking for work

43
Q

in employment

A

people who are either working for firms or other organisations, or self-employed

44
Q

income

A

a flow concept - the amount of income that is earned during a period

45
Q

index number

A

a device for comparing the value of a variable in one period or location with a base observation (e.g. the consumer price index measures the average level of prices relative to a base period)

46
Q

inflation

A

the rate of increase in the average price level in an economy

47
Q

injections

A

where money flows into the circular flow in the form of investment, government spending and exports

48
Q

interventionist policies

A

policies by which the government intervenes to stimulate aggregate supply

49
Q

investment

A

expenditure undertaken by firms on capital goods

50
Q

involuntary unemployment

A

situation arising when an individual who would like to accept a job at the going wage rate is unable to find employment

51
Q

Keynesian school

A

economists who believed that the macroeconomy could settle at an equilibrium that was below full employment

52
Q

labour productivity

A

a measure of output per worker, or output per hour worked

53
Q

macroeconomics

A

the study of the interrelationships between economic variables at an aggregate (macroeconomic) level

54
Q

marginal propensity to consume (MPC)

A

the proportion of additional income devoted to consumption

55
Q

marginal propensity to import (MPM)

A

the proportion of additional income that is spent on imports of goods and services

56
Q

marginal propensity to save (MPS)

A

the proportion of an increase in disposable income that households would devote to saving

57
Q

marginal propensity to tax (MPT)

A

the proportion of additional income that is taxed

58
Q

marginal propensity to withdraw (MPW)

A

the proportion of additional income that is withdrawn from the circular flow — the sum of the marginal propensities to save, import and tax

59
Q

market-based policies

A

policies that rely on allowing markets to work more freely and providing incentives for enterprise and initiative

60
Q

monetary policy

A

the decisions made by government regarding monetary variables such as the money supply or the interest rate

61
Q

Monetary Policy Committee

A

the body within the Bank of England responsible for the conduct of monetary policy

62
Q

money supply

A

the quantity of money in the economy

63
Q

multiplier

A

the ratio of a change in equilibrium real income to the autonomous change that brought it about; it is defined as 1 divided by the marginal propensity to withdraw

64
Q

natural rate of output

A

the long-run equilibrium level of output to which monetarists believe the macroeconomy will always tend

65
Q

natural rate of unemployment

A

the unemployment rate that will exist when the economy is in long-run equilibrium

66
Q

net investment

A

investment net of the replacement of existing capital (depreciation)

67
Q

nominal GDP

A

the value of GDP based on current prices, taking no account of changing prices through time

68
Q

output gap

A

the difference between actual real GDP and potential real GDP

69
Q

Phillips curve

A

an empirical relationship suggesting that there is a trade-off between unemployment and inflation

70
Q

potential economic growth

A

an expansion in the productive capacity of the economy

71
Q

productivity

A

a measure of the efficiency of a factor of production

72
Q

purchasing power parity (PPP)

A

an exchange rate adjusted to reflect the relative purchasing power of incomes in different countries

73
Q

quantitative easing

A

a process by which liquidity in the economy is increased when the Bank of England purchases assets from banks

74
Q

real balance effect

A

an effect by which an increase in the average price level reduces purchasing power and thus the quantity of real output demanded

75
Q

real GDP

A

an estimate of the volume of GDP taking account of changing prices through time

76
Q

real wage inflexibility

A

an argument that if real wages do not adjust downwards the result would be persistent unemployment

77
Q

recession

A

occurs when GDP falls for two or more consecutive quarters

78
Q

retail price index (RPI)

A

a measure of the average level of prices in the UK

79
Q

seasonal adjustment

A

a process by which seasonal fluctuations in a variable are smoothed to reveal the underlying trend

80
Q

seasonal unemployment

A

unemployment that arises in seasons of the year when demand is relatively low

81
Q

short-run aggregate supply curve (SRAS)

A

a curve showing how much output firms would be prepared to supply in the short run at any given overall price level

82
Q

stagnation

A

a situation describing an economy in which both unemployment and inflation are high at the same time

83
Q

structural unemployment

A

unemployment arising because of changes in the pattern of economic activity within an economy

84
Q

supply-side policies

A

a range of measures intended to have a direct impact on aggregate supply — and specifically the potential capacity output of the economy

85
Q

sustainable development

A

‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Brundtland Commission, 1987)

86
Q

trade (business) cycle

A

a phenomenon whereby GDP fluctuates around its underlying trend, following a regular pattern

87
Q

total factor productivity

A

the average productivity of all factors, measured as the total output divided by the total amount of inputs used

88
Q

transmission mechanism of monetary policy

A

the process by which a change in the bank rate affects inflation

89
Q

underemployment

A

where an individual is employed in a second-choice occupation or is only able to work part-time but would like to work full-time

90
Q

unemployed

A

people who are economically active but are not in employment

91
Q

voluntary unemployment

A

situation arising when an individual chooses not to accept a job at the going wage rate

92
Q

wealth

A

a stock concept — the accumulation of assets, such as property or shares

93
Q

wealth effects

A

where changes in household wealth induce changes in consumer expenditure

94
Q

withdrawals

A

where money flows out of the circular flow in the form of savings, taxation and imports

95
Q

workforce

A

people who are economically active either in employment or unemployed

Economics definitions (3 decks)

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