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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
discouraged workers
people who have been unable to find employment and who are no longer looking for work
26
disinflation
a fall in the rate of inflation
27
disposable income
the income that households have to devote to consumption and saving, taking into account payments of direct taxes and transfer payments
28
Easterlin paradox
the hypothesis that happiness increases with average incomes, but only up to a point
29
economically inactive
those people of working age who are not looking for work, for a variety of reasons
30
exchange rate
the price of one currency in terms of another
31
export-led growth
a strategy for achieving rapid economic growth through the promotion of export activity
32
financial account of the balance of payments
an account identifying transactions in financial assets between the residents of a country and the rest of the world
33
fiscal policy
decisions made by the government on its expenditure, taxation and borrowing
34
frictional unemployment
unemployment associated with job search (i.e. people who are between jobs)
35
full employment
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
36
GNI per capita
the average level of GNI per head of population
37
government budget deficit (surplus)
the balance between government expenditure and revenue
38
gross domestic product (GDP)
a measure of the economic activity carried out in the domestic economy over a period
39
gross investment
net investment plus depreciation
40
gross national income (GNI)
GDP plus net income from abroad
41
human capital
the stock of skills and expertise that contribute to a worker's productivity; it can be increased through education and training
42
ILO unemployment rate
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
in employment
people who are either working for firms or other organisations, or self-employed
44
income
a flow concept - the amount of income that is earned during a period
45
index number
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
inflation
the rate of increase in the average price level in an economy
47
injections
where money flows into the circular flow in the form of investment, government spending and exports
48
interventionist policies
policies by which the government intervenes to stimulate aggregate supply
49
investment
expenditure undertaken by firms on capital goods
50
involuntary unemployment
situation arising when an individual who would like to accept a job at the going wage rate is unable to find employment
51
Keynesian school
economists who believed that the macroeconomy could settle at an equilibrium that was below full employment
52
labour productivity
a measure of output per worker, or output per hour worked
53
macroeconomics
the study of the interrelationships between economic variables at an aggregate (macroeconomic) level
54
marginal propensity to consume (MPC)
the proportion of additional income devoted to consumption
55
marginal propensity to import (MPM)
the proportion of additional income that is spent on imports of goods and services
56
marginal propensity to save (MPS)
the proportion of an increase in disposable income that households would devote to saving
57
marginal propensity to tax (MPT)
the proportion of additional income that is taxed
58
marginal propensity to withdraw (MPW)
the proportion of additional income that is withdrawn from the circular flow — the sum of the marginal propensities to save, import and tax
59
market-based policies
policies that rely on allowing markets to work more freely and providing incentives for enterprise and initiative
60
monetary policy
the decisions made by government regarding monetary variables such as the money supply or the interest rate
61
Monetary Policy Committee
the body within the Bank of England responsible for the conduct of monetary policy
62
money supply
the quantity of money in the economy
63
multiplier
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
natural rate of output
the long-run equilibrium level of output to which monetarists believe the macroeconomy will always tend
65
natural rate of unemployment
the unemployment rate that will exist when the economy is in long-run equilibrium
66
net investment
investment net of the replacement of existing capital (depreciation)
67
nominal GDP
the value of GDP based on current prices, taking no account of changing prices through time
68
output gap
the difference between actual real GDP and potential real GDP
69
Phillips curve
an empirical relationship suggesting that there is a trade-off between unemployment and inflation
70
potential economic growth
an expansion in the productive capacity of the economy
71
productivity
a measure of the efficiency of a factor of production
72
purchasing power parity (PPP)
an exchange rate adjusted to reflect the relative purchasing power of incomes in different countries
73
quantitative easing
a process by which liquidity in the economy is increased when the Bank of England purchases assets from banks
74
real balance effect
an effect by which an increase in the average price level reduces purchasing power and thus the quantity of real output demanded
75
real GDP
an estimate of the volume of GDP taking account of changing prices through time
76
real wage inflexibility
an argument that if real wages do not adjust downwards the result would be persistent unemployment
77
recession
occurs when GDP falls for two or more consecutive quarters
78
retail price index (RPI)
a measure of the average level of prices in the UK
79
seasonal adjustment
a process by which seasonal fluctuations in a variable are smoothed to reveal the underlying trend
80
seasonal unemployment
unemployment that arises in seasons of the year when demand is relatively low
81
short-run aggregate supply curve (SRAS)
a curve showing how much output firms would be prepared to supply in the short run at any given overall price level
82
stagnation
a situation describing an economy in which both unemployment and inflation are high at the same time
83
structural unemployment
unemployment arising because of changes in the pattern of economic activity within an economy
84
supply-side policies
a range of measures intended to have a direct impact on aggregate supply — and specifically the potential capacity output of the economy
85
sustainable development
'development that meets the needs of the present without compromising the ability of future generations to meet their own needs' (Brundtland Commission, 1987)
86
trade (business) cycle
a phenomenon whereby GDP fluctuates around its underlying trend, following a regular pattern
87
total factor productivity
the average productivity of all factors, measured as the total output divided by the total amount of inputs used
88
transmission mechanism of monetary policy
the process by which a change in the bank rate affects inflation
89
underemployment
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
unemployed
people who are economically active but are not in employment
91
voluntary unemployment
situation arising when an individual chooses not to accept a job at the going wage rate
92
wealth
a stock concept — the accumulation of assets, such as property or shares
93
wealth effects
where changes in household wealth induce changes in consumer expenditure
94
withdrawals
where money flows out of the circular flow in the form of savings, taxation and imports
95
workforce
people who are economically active either in employment or unemployed

Economics definitions (3 decks)

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