Theme 2 Definitions Flashcards
Actual growth
economic growth by changes in real GDP
Aggregate demand
The total level of demand in an economy at any give price at a given moment of time
Aggregate supply
The total amount of output in the economy at any given price at a given moment
Animal spirits
The level of confidence in business owners (keynes)
Balance of payments
A record of all financial dealings over a period of time between economic agents of one country to another
a record of all international transactions between economies, consisting of the financial, current and capital account
Base year
A year chosen as a good comparison is series of data when building an index; it is automatically given an index figure of 100
Boom
The peak of the trade cycle when growth is high
budget
where the government lays out their spending and taxation plan
budget deficit
when the government’s spending is higher than their tax revenue
budget surplus
When the government’s revenue is higher than their spending
Circular flow of income
A model of the economy that shows the flow of goods and services, the factors of production and money around the economy
claimant count
a measure of unemployment through the number of people receiving benefits for being unemployed every month
consumer price index
official measures used to calculate the rate of inflation, using a weighted basket of goods
consumption
consumer spending on goods and services
cost push inflation
inflation caused by a decrease in AS
current account
a record of the payments for the purchase and sale of goods and services as well as income and transfers
current account deficit
when more money leaves the country than enters, so it is negative
current account surplus
when more money enters the country than leaves, it is positive
cyclical unemployment
Unemployment caused by the fluctuating nature of the trade cycle which is influenced by the levels of AD
deflation
a persistent fall in the prices of goods and services
deflationary policy
fiscal or monetary policies which is aimed to reduce AD (contractionary)
demand pull inflation
Inflation caused by an increase in AD
depreciation (capital)
The reduction in the value of machinery over time
depreciation
a fall in the value of the currency in a free floating exchange rate system
direct tax
taxes paid straight to the government by individual tax payers
disinflation
a reduction in the rate of inflation
disposable income
the money consumers have to spend, after taxes have been taken and benefits have been added
economic growth
an increase in the long run productive capacity in an economy
shows an increase in amount of goods produced
measured by an increase in GDP
employed
someone who does more than 1 hour of paid work a week
expansionary policies
fiscal or monetary policy which is aimed at increasing AD
exports
goods or services sold to foreigners that bring income into the country
export-led growth
economic growth arising from an increase in exports
fiscal policy
the use of borrowing. government spending and taxation to manipulate the levels of AD and improve macroeconomic performance
frictional unemployment
unemployment caused when people move between jobs and enter the job market
gross domestic product (GDP)
the value of goods and services produced in a country over a given period of time
GDP per capita
total GDP divided by the population
gross investment
investment both to replace old machinery that has depreciated and create/buy new ones
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
Gross National Product
the value of goods and services produced by citizens of a country whether they live in the country or not
government spending
spending by the government for the provision of goods and services
imports
goods and services bought from foreigners that takes income out of a country
inactive
those neither employed or unemployed; not participating the job market
income
a flow of assets
index number
number allowing accurate comparisons over time to be made. The base year value is typically 100
indirect tax
levy on expenditure
inflation
a general and sustained increase in prices
That erodes the purchasing power of money
injection
spending power entering the circular flow of income resulting from investment, government spending and exports
interventionist supply side policies
policies designed to correct market failure where the government intervenes with the market
investment
spending by businesses on capital goods, which leads to the creation of real goods
Labour force survey
a measure of unemployment which surveys people to class them as unemployed, employed or inactive under the ILO definitions
living standards
the quality of life enjoyed by people in a country
long run
when all factors of production are variable
LRAS
the total output of an economy when producing at full output
long run trend growth rate
the average sustainable rate of economic growth over a period of time
marginal propensity to consume
the proportion of an increase in income spend on consumption
change in consumption/change in income
MPM
the proportion of an increase in income spend on imports
MPS
the proportion of an increase in income that is saved
MPT
the proportion of an increase in income taken away in tax
market-based supply side policies
policies which are designed to remove anything which prevents the market system working efficiently
monetary policies
measures made by central banks to control levels of AD due to changes in IR, ER and money supply
Monetary policy committee
9 economists who meet monthly to set the bank rate as well as other monetary instruments
monetary supply
stock of money in the economy
multiplier
an increase in injection/withdrawals would lead to even greater change in national income
1/1-mpc or 1/mpw
national expenditure
the value of spending by households on goods and services
National income
the value of income paid by firms to households in return for land, labour, capital and enterprise
national output
the value of the flow of goods and services from firms to household
negative output gap
when GDP is lower than predicted; the economy is producing below full output
trend rate growth > actual growth
net trade
exports minus imports
net investment
investment adjusted for depreciation; gross investment minus depreciation
nominal gdp
GDP that does not take inflation into account; GDP at current prices
output gap
the difference between long term trend rate of growth and actual growth
positive output gap
when GDP is higher than predicted; the economy is producing above full output
potential growth
a change in the productive potential of an economy
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
quantitative easing
when the central bank print electronically money to buy assets in exchange in an attempt to increase the money supply as investors may choose to save due to higher yield leading to higher deposits and increase loans given by banks
real gdp
GDP that takes into account inflation
real wage unemployment
unemployment caused when wages are set above equilibrium wage rate
recession
the trough of the business cycle when growth is low. The government defines it as where real GDP falls in at least two consecutive quarters
RPI (retail price index)
The old measure of inflation which has lost its national statistic status
savings
the decision by consumers to postpone consumption
seasonal uneployment
unemployment caused when an industry only operates during certain time of the year
short run
when at least one factor of production is fixed
SRAS
AS when at least one of the factors of production is fixed
Short run Philips curve
Shows the relationship between unemployment and inflation; higher levels of unemployment lead to lower levels of inflation
structural unemployment
unemployment caused by the long term decline of an industry
supply side policies
government policies aimed at increasing the productive potential of the economy by shifting LRAS to the right
This is done by increase the quality or quantity of factors of production
total GDP
the GDP of the whole country
trade cycle
the tendency of economic growth to rise and fall above and below the trend rate of economic growth, causing booms and recessions
underemployment
Those who are working part time, on zero hour contracts or those employed in areas under their skill level
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 and have been unemployed for the last 4 weeks
value of gdp
nominal values of GDP; GDP at current prices
volume of gdp
real values of GDP; the size of basket of goods
wealth
a stock of assets
withdrawals
spending power leaving the circular flow of income resulting from savings, taxation and imports
