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Economics AS > Theme 2 definitions > Flashcards

Theme 2 definitions Flashcards

1
Q

Index number

A

Used to track each economic factor

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2
Q

Nominal value

A

Price without removing inflation

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3
Q

Real value

A

Price with removing inflation

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4
Q

Economic growth

A

An increase in the productive potential of an economy

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5
Q

GDP

A
  • Gross Domestic Product

- Represents the total output of an economy during a period of time.

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6
Q

GDP per capita

A

The average GDP per head of population

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7
Q

GNI

A
  • Gross National Income

- Takes into account income flows between countries

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8
Q

Long run economic growth

A

Expansion of the economy capacity to produce goods and services

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9
Q

Short run growth

A

Increase in real GDP over a period of time

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10
Q

Power purchasing parity

A

The measurement of prices in different countries that uses the prices of specific goods to compare the purchasing power of the countries’ currencies.

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11
Q

Inflation

A

An increase in the overall level of prices in an economy.

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12
Q

Deflation

A

Negative inflation

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13
Q

Disinflation

A

A period in which inflation falls relative to the previous period

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14
Q

Basket of goods and services

A

A fixed set of consumer products and services whose price is evaluated on a regular basis, often monthly or annually.

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15
Q

Hyperinflation

A

Very high inflation and usually accelerating rates of inflation

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16
Q

Consumer Price Index (CPI)

A
  • It is the price of a weighted average market basket of consumer goods and services purchased by households
  • Main measure of inflation
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17
Q

Shrinkflation

A

Changing the size of products rather than the price

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18
Q

Redistribution effect

A

Inflation redistributes income away from certain groups in the economy and towards other groups

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19
Q

Menu costs

A

Costs incurred by firms when they have to print new menus due to changes in prices

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20
Q

Money illusion

A

Refers to the idea that some people feel better off when their nominal income increases, even though the price level may increase at the same rate and possibly even faster

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21
Q

Demand pull inflation

A

When aggregate or total demand rises and there is no increase in aggregate supply

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22
Q

Cost pull inflation

A

When aggregate supply decreases

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23
Q

Money supply

A

The amount of money flowing in the economy

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24
Q

Employment

A

The state of being paid to work for a company or organisation

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25
Q

Unemployment

A

The state of being out of work while being willing and able to work

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26
Q

Long term unemployment

A

It accounts for people who have been out of work for at least one year

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27
Q

Cyclical unemployment

A

Cyclical unemployment is caused by low levels of aggregate demand, reducing the demand for labour

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28
Q

Frictional unemployment

A

Frictional unemployment is caused by workers seeking a better job or who are in-between jobs.

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29
Q

Structural unemployment

A

Caused by lack of suitable skills for the jobs available

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30
Q

Unemployment trap

A

This is a situation in which there is little financial incentive for someone who is unemployed to start working because the combined loss of benefits and a need for them to pay taxes may lead to them being worse off

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31
Q

Real wage unemployment

A

When real wage rates are stuck at a level above that needed to reduce unemployment any further

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32
Q

Economically active

A

Those who are of working age but are neither in work or actively seeking work

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33
Q

Discouraged workers

A

People who have failed to find work and have given up looking

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34
Q

Underemployment

A

Those who would prefer to work longer hours or are in a job below their skill set, they are under-utilised

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35
Q

Labour force survey

A

Identifies the number of people available for work, and seeking work, but without a job

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36
Q

Claimant count measure

A

The total number of recipients of JSA and UC

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37
Q

Balance of payment accounts

A

They record all financial transactions between residents of a country and the rest of the world over a time period

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38
Q

Balance of trade

A

The difference between the value of visible exports and visible imports

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39
Q

Current balance

A

Difference between the value of total exports and total imports

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40
Q

Current account

A

It records money flow between the UK and the rest of the world arising from trade in goods and services, income from owning overseas assets and overseas transfers

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41
Q

Trade in goods (visible)

A

These are goods traded in or out of the country, known as visible

42
Q

Trade in services (invisibles)

A

These are services traded in or out of the country, known as invisibles.

43
Q

Exports

A

Goods and services sold to foreigners by UK firms

44
Q

Imports

A

Goods and services bought by UK residents and firms from foreigners

45
Q

Current account surplus

A

When there are more inflows than outflows

46
Q

Current account deficit

A

When there are more inflows than outflows

47
Q

Primary income

A

Income from the loan of factors of production abroad

48
Q

Secondary income

A

A range of mainly government transfers to and from overseas organisations

49
Q

Open economy

A

An economy in which there is foreign trade

50
Q

Closed economy

A

An economy in which there is no foreign trade

51
Q

National output

A

e value of the flow of goods and services from firms and households

52
Q

National expenditure

A

The value of spending by households on goods and services

53
Q

National income

A

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

54
Q

Aggregate demand

A

It is the total demand for goods and services in an economy at a given time

55
Q

Wealth

A

Wealth is the value of a stock of assets owned by someone

56
Q

Income

A

Income is the flow of money going to factors of production

57
Q

Injection

A

An injection into the circular flow is a monetary addition to the economy

58
Q

Investment

A

Spending by firms on new capital equipment like factories offices and machinery

59
Q

Government spending

A

Spending by central, local and other government agencies

60
Q

Withdrawal

A

Where money is removed from the economy

61
Q

Savings

A

Money which is saved and not spent by households or firms

62
Q

Consumer spending

A

How much consumers spend on goods and services.

63
Q

X-M (Exports - imports)

A

This is the value of the current account on the balance of payments.

64
Q

Wealth effect

A

Refers to when changes in the price level affect the real value of peoples wealth

65
Q

International trade effect

A

The international trade effect speaks about the change in value of exports and imports

66
Q

Interest rate effect

A

Refers to when changes in the price level affect the rate of interest

67
Q

Depreciation

A

Depreciation is the decrease in the value of stock

68
Q

Gross investment

A

Measures investment before depreciation

69
Q

Net investment

A

Measures investment after depreciation

70
Q

Investment in human capital

A

Investment in the education and training of workers

71
Q

Investment in physical capital

A

Investment in factories and machinery

72
Q

Retained profit

A

Savings that firms keep and do not distribute to their owners

73
Q

Capital spending

A

Investment spending by the government`

74
Q

Exchange rate

A

An exchange rate is the price of one country’s currency in terms of another country’s currency

75
Q

Level of trade protection

A

It refers to restrictions to international trade imposed by governments

76
Q

Aggregate supply

A

The total amount of goods and services that producers are willing and able to supply at a given price over a given time period

77
Q

SRAS

A

A period in which at least one factor of production is fixed

78
Q

Supply side shock

A

When there is a large change in wage rates, material prices or taxation.

79
Q

LRAS

A

A period in which all factors of production are variable and technological change is possible

80
Q

Positive output gap

A

Actual GDP is more than the potential GDP.

81
Q

Negative output gap

A

Actual GDP is less than the potential GDP

82
Q

Multiplier effect

A

When injections into the circular flow of income eventually lead to an even bigger increase in national income

83
Q

Multiplier ratio

A

Measures the proportionate change in national income in response to a change in withdrawals and injections

84
Q

Positive multiplier

A

When an increase in injections leads to a greater final increase in real GDP

85
Q

Negative multiplier

A

When a decrease in injections leads to a greater final decrease in real GDP

86
Q

MPC

A

The proportion of any extra income that is spent on goods and services

87
Q

MPS

A

The proportion of any extra income that is saved

88
Q

MPT

A

The proportion of any extra income that is paid as taxes

89
Q

MPW

A

The proportion of any extra income that is withdrawn from the economy

90
Q

Land

A

Not only as the land itself but also all the natural resources that come with it

91
Q

Participation rates

A

Participation rates are the proportion of the population of a certain age who are either in work or seeking work

92
Q

Economic efficiency

A

The way in which the factors of production are combined to produce goods and services

93
Q

Demand side shock

A

A shock which affects aggregate demand

94
Q

Supply side shock

A

A shock which affects aggregate supply

95
Q

Output gap

A

The difference between the actual level of real GDP and is estimated long term trend at a specific point

96
Q

Easterlin paradox

A

The idea that increases in GDP do not lead to increases in happiness

97
Q

Non marketed output

A

Output of goods and services that are not sold in the market and do not generate any income

98
Q

Underground market

A

Where a buying/selling transaction is unrecorded and are therefore not included in GDP/GNI

99
Q

Purchasing power

A

It refers to the quantity of goods and services that can be bought with money

100
Q

Excise duties

A

Excise duties are indirect taxes on the sale or use of specific products, such as alcohol, tobacco, and energy.

Economics AS (11 decks)

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