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Economics key terms > Theme 2 > Flashcards

Theme 2 Flashcards

1
Q

Actual growth

A

Economic growth measured by changes in real GDP

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2
Q

Aggregate demand
(AD)

A

The total level of demand in an economy at any given price at a
moment in time

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2
Q

Animal spirits

A

The level of confidence of business owners

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2
Q

Aggregate supply
(AS)

A

The total amount of output in the economy at any given price at a
moment in time

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2
Q

Balance of payments

A

A record of all financial dealings over a period of time between
economic agents of one country and another

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2
Q

Budget

A

Where the government lays out their spending and taxation plans

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2
Q

Circular flow

A

A model of the economy which shows the flow of goods and services,
the factors of production and money around the economy

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2
Q

Base year

A

A year chosen as a good comparison in series of data when building an
index; it is automatically given an index figure of 100

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2
Q

Budget deficit

A

When the government spends more money than it receives

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2
Q

Consumer Price
Index (CPI)

A

Official measure used to calculate the rate of inflation, using a weighted
basket of goods.

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2
Q

Boom

A

The peak of the business cycle, when growth is high

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2
Q

Consumption

A

Consumer spending on goods and services

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3
Q

Budget surplus

A

When the government receives more money than it spends

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3
Q

Cost push inflation

A

Inflation caused by a decrease in AS

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3
Q

Claimant count

A

A measure of unemployment; the number of people receiving benefits
for being unemployed

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4
Q

Current account
deficit

A

When more money leaves the country than enters, so the current
account is negative

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4
Q

Current account

A

A record of the payments for the purchase and sale of goods and
services, as well as income and transfers

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5
Q

Current account
surplus

A

When more money enters the country than leaves, so the current
account is positive

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6
Q

Cyclical
unemployment

A

Unemployment caused by a lack of AD

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7
Q

Deflation

A

A persistent fall in prices of goods and services

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8
Q

Deflationary policy

A

Fiscal or monetary policy which is aimed at reducing AD

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9
Q

Demand pull
inflation

A

Inflation caused by an increase in AD

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10
Q

Depreciation

A

The reduction in the value of machinery overtime

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11
Q

Direct tax

A

Taxes paid straight to the government by the individual taxpayer

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12
Disinflation
A reduction in the rate of inflation
13
Disposable income
The money consumers have left to spend, after taxes have been taken away and benefits added
14
Economic growth
An increase in the long term productive potential in the economy; an increase in the amount of goods and services which are produced, measured by an increase in real GDP
15
Employed
Someone who does more than 1 hour of paid work a week or is temporarily away from work, on a government supported training scheme or does a minimum of 15 hours unpaid work for their family business (ILO definition)
16
Expansionary policy
Fiscal or monetary policy which is aimed at increasing AD
17
Exports
Goods or services sold to foreigners that bring income into the country
18
Export-led growth
Economic growth arising from an increase in exports
19
Fiscal policy
The use of borrowing, government spending and taxation to manipulate the level of AD and improve macroeconomic performance
20
Frictional unemployment
Unemployment caused when people move between jobs and enter the job market
21
Gross Domestic Product (GDP)
The value of goods and services produced in a country over a given period of time
22
GDP per capita
Total GDP divided by the population
23
Gross investment
Investment both to replace old machinery that has depreciated and to create/buy new ones
24
Gross National Income (GNI)
The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends
25
Gross National Product (GNP)
The value of goods and services produced by citizens of a country, whether they live in the country or not.
25
Government spending
Spending by the government for the provision of goods and services
26
Imports
Goods and services bought from foreigners that takes income out of the country
27
Inactive
Those neither employed nor unemployed; those not participating in the job market
28
Income
A flow of assets
29
Index number
Numbers allowing accurate comparisons over time to be made. The base year value is typically 100
30
Indirect tax
Tax where the person charged with paying the money to the government is able to pass on the cost to someone else
31
Inflation
The general rise in prices of goods and services that erodes the purchasing power of money
32
Injection
Spending power entering the circular flow of income resulting from investment, government spending and exports
33
Interventionist supply side policies
Policies designed to correct market failure, where the government intervenes in the market
34
Investment
Spending by businesses on capital goods, which leads to the creation of real goods
35
Labour Force Survey
A measure of unemployment which surveys people to class them as unemployed, employed or inactive under the International Labour Organisation (ILO) definitions
36
Living standards
The quality of life enjoyed by people in a country
37
Long run
When all factors of production are variable
38
Long run aggregate supply (LRAS)
The total output an economy can produce when operating at full output
39
Long run trend growth rate
The average sustainable rate of economic growth over a period of time
40
Marginal propensity to consume
The proportion of an increase in income spent on consumption change in consumption change in income
41
Marginal propensity to import
The proportion of an increase in income spent on imports
42
Marginal propensity to save
The proportion of an increase in income that is saved
43
Marginal propensity to tax
The proportion of an increase in income that is taken away in tax
44
Marginal propensity to withdraw
The proportion of an increase in income that is withdrawn from the circular flow
45
Market-based supply-side policies
Policies which are designed to remove anything which prevents the free market system working efficiently
46
Monetary policy
The attempts of the central bank/regulatory authority to control the level of AD by altering base interest rates or the amount of money in the economy
47
Monetary Policy Committee (MPC)
9 economists who meet monthly to set the Bank rate as well as other monetary instruments
48
Monetary supply
Stock of money in the economy
49
Multiplier
An increase in an injection will lead to an even greater increase of national income 1 = 1 (1-MPC) MPW
50
National expenditure
The value of spending by households on goods and services
51
National income
The value of income paid by firms to households in return for land, labour, capital and enterprise
52
National output
The value of the flow of goods and services from firms to households
53
Negative output gap
When GDP is lower than predicted; the economy is producing below full output
54
Net exports
Exports minus imports
55
Net investment
Investment adjusted for depreciation; gross investment minus depreciation
56
Nominal GDP
GDP which does not take inflation into account; GDP at current prices
57
Output gap
The difference between the long term trend rate of growth and actual growth
58
Positive output gap
When GDP is higher than predicted; the economy is producing above full output
59
Potential growth
A change in the productive potential of the economy
60
Purchasing power parity
Exchange rate of one currency to another that compares the cost of living in different countries through comparing a typical basket of goods
61
Quantitative easing
When the central banks buys assets in exchange for money in an attempt to increase the money supply
62
Real GDP
GDP which strips out the effect of inflation
63
Real wage unemployment
Unemployment caused when wages are set above the equilibrium wage rate
64
Recession
The trough of the business cycle, when growth is low. The government defines it as where real GDP falls in at least two successive quarters
65
Retail Price Index (RPI)
An old measure of inflation which has lost its national statistic status
66
Savings
The decision by consumers to postpone consumption
67
Seasonal unemployment
Unemployment caused when an industry only operates during certain times of the year
68
Short run
When at least one factor of production is fixed
69
Short run aggregate supply (SRAS)
Aggregate supply when at least one factor of production is fixed
70
Short run Phillips curve
Shows the relationship between unemployment and inflation: higher levels of unemployment lead to lower levels of inflation
71
Structural unemployment
Unemployment caused by the long-term decline of an industry
72
Supply-side policies
Government policies aimed at increasing the productive potential of the economy and shifting LRAS to the right
73
Total GDP
The GDP of the whole country
74
Trade (business) cycle
The tendency of economic growth to rise and fall above and below the trend rate of economic growth, causing booms and busts
75
Underemployment
Those who are working part time, on zero hour contracts or on government training schemes but would prefer to be full time or those employed in areas under their skill level e.g. a graduate working at a bar
76
Unemployed
Those who are without work, able to start work in the next 2 weeks and have actively sought work for the last 4 weeks (ILO definition)
77
Value of GDP
Nominal values of GDP; GDP at current prices
78
Volume of GDP
Real values of GDP; the size of the basket of goods
79
Wealth
A stock of assets
80
Withdrawal
Spending power leaving the circular flow of income resulting from savings, taxation and imports.

Economics key terms (4 decks)

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