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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
Q

Disinflation

A

A reduction in the rate of inflation

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13
Q

Disposable income

A

The money consumers have left to spend, after taxes have been taken
away and benefits added

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14
Q

Economic growth

A

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

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15
Q

Employed

A

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)

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16
Q

Expansionary policy

A

Fiscal or monetary policy which is aimed at increasing AD

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17
Q

Exports

A

Goods or services sold to foreigners that bring income into the country

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18
Q

Export-led growth

A

Economic growth arising from an increase in exports

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19
Q

Fiscal policy

A

The use of borrowing, government spending and taxation to manipulate
the level of AD and improve macroeconomic performance

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20
Q

Frictional
unemployment

A

Unemployment caused when people move between jobs and enter the
job market

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21
Q

Gross Domestic
Product (GDP)

A

The value of goods and services produced in a country over a given
period of time

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22
Q

GDP per capita

A

Total GDP divided by the population

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23
Q

Gross investment

A

Investment both to replace old machinery that has depreciated and to
create/buy new ones

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24
Q

Gross National
Income (GNI)

A

The value of goods and services produced by a country over a period
of time plus net overseas interest payments and dividends

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25
Q

Gross National
Product (GNP)

A

The value of goods and services produced by citizens of a country,
whether they live in the country or not.

25
Q

Government
spending

A

Spending by the government for the provision of goods and services

26
Q

Imports

A

Goods and services bought from foreigners that takes income out of
the country

27
Q

Inactive

A

Those neither employed nor unemployed; those not participating in the
job market

28
Q

Income

A

A flow of assets

29
Q

Index number

A

Numbers allowing accurate comparisons over time to be made. The
base year value is typically 100

30
Q

Indirect tax

A

Tax where the person charged with paying the money to the
government is able to pass on the cost to someone else

31
Q

Inflation

A

The general rise in prices of goods and services that erodes the
purchasing power of money

32
Q

Injection

A

Spending power entering the circular flow of income resulting from
investment, government spending and exports

33
Q

Interventionist
supply side policies

A

Policies designed to correct market failure, where the government
intervenes in the market

34
Q

Investment

A

Spending by businesses on capital goods, which leads to the creation
of real goods

35
Q

Labour Force Survey

A

A measure of unemployment which surveys people to class them as
unemployed, employed or inactive under the International Labour
Organisation (ILO) definitions

36
Q

Living standards

A

The quality of life enjoyed by people in a country

37
Q

Long run

A

When all factors of production are variable

38
Q

Long run aggregate
supply (LRAS)

A

The total output an economy can produce when operating at full output

39
Q

Long run trend
growth rate

A

The average sustainable rate of economic growth over a period of time

40
Q

Marginal propensity
to consume

A

The proportion of an increase in income spent on consumption
change in consumption
change in income

41
Q

Marginal propensity
to import

A

The proportion of an increase in income spent on imports

42
Q

Marginal propensity
to save

A

The proportion of an increase in income that is saved

43
Q

Marginal propensity
to tax

A

The proportion of an increase in income that is taken away in tax

44
Q

Marginal propensity
to withdraw

A

The proportion of an increase in income that is withdrawn from the
circular flow

45
Q

Market-based
supply-side policies

A

Policies which are designed to remove anything which prevents the
free market system working efficiently

46
Q

Monetary policy

A

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
Q

Monetary Policy
Committee (MPC)

A

9 economists who meet monthly to set the Bank rate as well as other
monetary instruments

48
Q

Monetary supply

A

Stock of money in the economy

49
Q

Multiplier

A

An increase in an injection will lead to an even greater increase of
national income
1 = 1
(1-MPC) MPW

50
Q

National expenditure

A

The value of spending by households on goods and services

51
Q

National income

A

The value of income paid by firms to households in return for land,
labour, capital and enterprise

52
Q

National output

A

The value of the flow of goods and services from firms to households

53
Q

Negative output gap

A

When GDP is lower than predicted; the economy is producing below
full output

54
Q

Net exports

A

Exports minus imports

55
Q

Net investment

A

Investment adjusted for depreciation; gross investment minus
depreciation

56
Q

Nominal GDP

A

GDP which does not take inflation into account; GDP at current prices

57
Q

Output gap

A

The difference between the long term trend rate of growth and actual
growth

58
Q

Positive output gap

A

When GDP is higher than predicted; the economy is producing above
full output

59
Q

Potential growth

A

A change in the productive potential of the economy

60
Q

Purchasing power
parity

A

Exchange rate of one currency to another that compares the cost of
living in different countries through comparing a typical basket of goods

61
Q

Quantitative easing

A

When the central banks buys assets in exchange for money in an
attempt to increase the money supply

62
Q

Real GDP

A

GDP which strips out the effect of inflation

63
Q

Real wage
unemployment

A

Unemployment caused when wages are set above the equilibrium
wage rate

64
Q

Recession

A

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
Q

Retail Price Index
(RPI)

A

An old measure of inflation which has lost its national statistic status

66
Q

Savings

A

The decision by consumers to postpone consumption

67
Q

Seasonal
unemployment

A

Unemployment caused when an industry only operates during certain
times of the year

68
Q

Short run

A

When at least one factor of production is fixed

69
Q

Short run aggregate
supply (SRAS)

A

Aggregate supply when at least one factor of production is fixed

70
Q

Short run Phillips
curve

A

Shows the relationship between unemployment and inflation: higher
levels of unemployment lead to lower levels of inflation

71
Q

Structural
unemployment

A

Unemployment caused by the long-term decline of an industry

72
Q

Supply-side policies

A

Government policies aimed at increasing the productive potential of the
economy and shifting LRAS to the right

73
Q

Total GDP

A

The GDP of the whole country

74
Q

Trade (business)
cycle

A

The tendency of economic growth to rise and fall above and below the
trend rate of economic growth, causing booms and busts

75
Q

Underemployment

A

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
Q

Unemployed

A

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
Q

Value of GDP

A

Nominal values of GDP; GDP at current prices

78
Q

Volume of GDP

A

Real values of GDP; the size of the basket of goods

79
Q

Wealth

A

A stock of assets

80
Q

Withdrawal

A

Spending power leaving the circular flow of income resulting from
savings, taxation and imports.

Economics key terms (4 decks)

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