Theme 2 Definitions Flashcards
1
Q
Actual Growth
A
Economic growth measured by changes in real GDP
2
Q
Aggregate Demand (AD)
A
The total level of demand in an economy at any given price at a moment in time
3
Q
Aggregate Supply (AS)
A
The total amount of output in the economy at any given price at a moment in time
4
Q
Animal Spirits
A
Keynesian Concept - The level of confidence of business owners
5
Q
Balance of Payments
A
A record of all financial dealings over a period of time between economic agents of one country and another
6
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
7
Q
Boom
A
The peak of the business cycle, when growth is high
8
Q
Budget
A
Where the government lays out their spending and taxation plans
9
Q
Budget Deficit
A
When the government spends more money than it receives
10
Q
Budget Surplus
A
When the government receives more money than it spends
11
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
12
Q
Claimant Count
A
A measure of unemployment; the number of people receiving benefits for being unemployed
13
Q
Consumer Price Index (CPI)
A
Official measure used to calculate the rate of inflation, using a weighted basket of goods
14
Q
Cost Push Inflation
A
Inflation caused by a decrease in AS
15
Q
Current Account
A
A record of the payments for the purchase and sale of goods and services, as well as income and transfers
16
Q
Current Account Deficit
A
When more money leaves the country than enters, so the current account is negative
17
Q
Current Account Surplus
A
When more money enters the country than leaves, so the current account is positive
18
Q
Cyclical Unemployment
A
Unemployment caused by a lack of AD
19
Q
Deflation
A
Unemployment caused by a lack of AD
20
Q
Deflationary Policy
A
Fiscal or monetary policy which is aimed at reducing AD
21
Q
Demand Pull Inflation
A
Inflation caused by an increase in AD
22
Q
Depriciation
A
The reduction in the value of machinery/capital overtime
23
Q
Direct Tax
A
Taxes paid straight to the government by the individual taxpayer
24
Q
Disinflation
A
A reduction in the rate of inflation
25
Disposable Income
The money consumers have left to spend, after taxes have been taken away and benefits added
26
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
27
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)
28
Expansionary Policy
Fiscal or monetary policy which is aimed at increasing AD
29
Exports
Goods or services sold to foreigners that bring income into the country
30
Export-Led Growth
Economic growth arising from an increase in exports
31
Fiscal Policy
The use of borrowing, government spending and taxation to manipulate the level of AD and improve macroeconomic performance
32
Frictional Unemployment
Unemployment caused when people move between jobs and enter the job market
33
Gross Domestic Product (GDP)
The value of goods and services produced in a country over a given period of time
34
GDP Per Capita
a Total GDP divided by the population
35
Gross Investment
Investment both to replace old machinery that has depreciated and to create/buy new ones
36
Gross Nation Income (GNI)
The value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends
37
Gross National Product (GNP)
The value of goods and services produced by citizens of a country, whether they live in the country or not.
38
Government Spending
Spending by the government for the provision of goods and services
39
Imports
Goods and services bought from foreigners that takes income out of the country
40
Inactive
Those neither employed nor unemployed; those not participating in the job market
41
Income
A flow of assets
42
Index Number
Numbers allowing accurate comparisons over time to be made. The base year value is typically 100
43
Indirect Tax
Tax where the person charged with paying the money to the government is able to pass on the cost to someone else
44
Inflation
The general rise in prices of goods and services that erodes the purchasing power of money
45
Injection
Spending power entering the circular flow of income resulting from investment, government spending and exports
46
Interventionist Supply Side Policy
Policies designed to correct market failure, where the government intervenes in the market
47
Investment
Spending by businesses on capital goods, which leads to the creation of real goods
48
Consumption
Consumer spending on goods and services
49
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
50
Living Standards
The quality of life enjoyed by people in a country
51
Long Run
When all factors of production are variable
52
Long Run Aggregate Supply
The total output an economy can produce when operating at full output
53
Long Run Trend Growth Rate
The average sustainable rate of economic growth over a period of time
54
Marginal Propensity to Consume
The proportion of an increase in income spent on consumption
change in consumption divided by
change in income
55
Marginal Propensity to Import
The proportion of an increase in income spent on imports
56
Marginal Propensity to Save
The proportion of an increase in income that is saved
57
Marginal Propensity to Tax
The proportion of an increase in income that is taken away in tax
58
Marginal Propensity to Withdraw
The proportion of an increase in income that is withdrawn from the circular flow
59
Market-Based Supply-Side Policies
Policies which are designed to remove anything which prevents the free market system working efficiently
60
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
61
Monetary Policy Committee (MPC)
9 economists who meet monthly to set the Bank rate as well as other monetary instruments
62
Monetary Supply
Stock of money in the economy
63
Multiplier
An increase in an injection will lead to an even greater increase of national income
Multiplier (k) = 1/1-MPC = 1/MPW
64
National Expenditure
The value of spending by households on goods and services
65
National Income
The value of income paid by firms to households in return for land, labour, capital and enterprise
66
National Output
The value of the flow of goods and services from firms to households
67
Negative Output Gap
When GDP is lower than predicted; the economy is producing below full output
68
Net Exports
Exports minus imports
69
Net Investment
Investment adjusted for depreciation; gross investment minus depreciation
70
Nominal GDP
GDP which does not take inflation into account; GDP at current prices
71
Output Gap
The difference between the long term trend rate of growth and actual growth
72
Positive Output Gap
When GDP is higher than predicted; the economy is producing above full output
73
Potential Growth
A change in the productive potential of the economy
74
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
75
Quantitative Easing
When the central banks buys assets in exchange for money in an attempt to increase the money supply
76
Real GDP
GDP which strips out the effect of inflation
77
Real Wage Unemployment
Unemployment caused when wages are set above the equilibrium wage rate
78
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
79
Retail Price Index (RPI)
An old measure of inflation which has lost its national statistic status
80
Savings
The decision by consumers to postpone consumption
81
Seasonal Unemployment
Unemployment caused when an industry only operates during certain times of the year
82
Short Run
When at least one factor of production is fixed
83
Short Run Aggregate Supply (SRAS)
Aggregate supply when at least one factor of production is fixed
84
Short Run Phillips Curve
Shows the relationship between unemployment and inflation: higher levels of unemployment lead to lower levels of inflation
85
Structural Unemployment
Unemployment caused by the long-term decline of an industry
86
Supply-Side Policies
Government policies aimed at increasing the productive potential of the economy and shifting LRAS to the right
87
Total GDP
The GDP of the whole country
88
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
89
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
90
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)
91
Value of GDP
Nominal values of GDP; GDP at current prices
92
Volume of GDP
Real values of GDP; the size of the basket of goods
93
Wealth
A stock of assets
94
Withdrawal
Spending power leaving the circular flow of income resulting from savings, taxation and imports
95
Easterlin Paradox
The hypothesis that happiness increases with average incomes, but only up to a point
96
Full Employment
A situation where people who are economically active in the workforce and willing and able to work at going wage rates are able to find employment
97
Human Capital
The stock of skills and expertise that contribute to a worker's productivity; it can be increased through education and training
98
Monetary Supply
Stock of money in the economy
99
Interventionist Policies
Policies by which the government intervenes to stimulate aggregate supply
100
Involuntary Unemployment
Situation arising when an individual who would like to accept a job at the going wage rate is unable to find employment
101
Keynesian School
Economists who believed that the macroeconomy could settle at an equilibrium that was below full employment
102
Natural Rate of Output
The long-run equilibrium level of output to which monetarists believe the macroeconomy will always tend
103
Natural Rate of Unemployment
The unemployment rate that will exist when the economy is in long-run equlibrium
104
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
105
Real Wage Inflexibility
An argument that if real wages do not adjust downwards the result would be persistent unemployment
106
Seasonal Adjustment
A process by which seasonal fluctuations in a variable are smoothed to reveal the underlying trend
107
Stagflation
A situation describing an economy in which unemployment and inflation are high at the same time
108
Sustainable Development
Development that meets the needs of the present without compromising the ability of the future generations to meet their own needs
109
Total Factor Productivity
The average productivity of all factors, measured as the total output divided by the total amount of inputs used
110
Transmission Mechanism of Monetary Policy
The process by which a change in the bank rate affects inflation
111
Voluntary Employment
A situation arising when an individual chooses not to accept a job at the going wage rate
112
Workforce
People who are economically active - either employed or unemployed
