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Econ - MACRO > Theme 2 Key Terms > Flashcards

Theme 2 Key Terms Flashcards

1
Q

actual growth

A

economic growth measured by changes in real GDP

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2
Q

AD proportions

A

consumption: 60%
investment: 15-20%
govt spending: 18-20%
net trade: 5%

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3
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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4
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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5
Q

animal spirits

A

the level of confidence of business owners, and the feeling of whether their investment would be profitable

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6
Q

avg propensity to consume (APC)

A

(total consumption) / (total income)

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7
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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8
Q

bank multiplier ↑↓

A
  • make their money by taking in our deposits and lending money out @ int rates
  • the person who receives the money the borrower has spent is likely to input it back into bank system.
  • if keeping 10%, initial is £100m, keep £10m lendd out £90m. £90m deposited back, keep £9m lend out £81m. Re deposited £81m, keep £8.1, lend out £72.9m.
  • by doing this, ↑ money supply
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9
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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10
Q

boom

A

the peak of the business cycle, when growth is high

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11
Q

budget

A

where the government lays out their spending and taxation plans

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12
Q

budget deficit

A

when the govt spends more money than it receives

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13
Q

budget surplus

A

when the govt receives more money than it spends

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14
Q

capital / financial account

A

records flows of money associated with saving, investment, speculation and currency stabilisation

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15
Q

circular flow of income

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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16
Q

what does the circular flow look like?
2 main components?
inputs / outputs?
injections / withdrawals?

A
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17
Q

claimant count

A
  • a measure of unemployment
  • the number of people receiving benefits for being unemployed
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18
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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19
Q

Consumption

A

consumer spending on goods and services

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20
Q

cost push inflation

A

inflation caused by a decrease in AS

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21
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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22
Q

current account deficit

A

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

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23
Q

cyclical/ demand deficient unemployment

A

unemployment caused by a lack of AD
- recession vs boom

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24
Q

deflation

A

a persistent fall in prices of goods and services

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25
Q

deflationary policy

A

fiscal or monetary policy which is aimed at reducing AD to control inflation

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26
Q

demand pull inflation

A

inflation caused by an increase in AD

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27
Q

depreciation

A

the reduction in the value of machinery overtime

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28
Q

direct tax

A

taxes paid straight to the govt by the individual taxpayer

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29
Q

disinflation

A

a reduction in the rate of inflation

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30
Q

disposable income

A

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

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31
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, measure by an increase in real GDP
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32
Q

economic growth formula

A

Q²CELL

Quality / Quantity
Capital (investment -> tech/machines=prod up)
Enterprise (new business, jobs, more produce)
Land (land/resources)
Labour (size/quantity)

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33
Q

employed

A
  • someone who does more than 1 hour of paid work a week, or is temporarily away from work, on a govt supported training scheme or does a minimum of 15 hours unpaid work for their business
  • ILO definition
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34
Q

expansionary policy

A
  • fiscal or monetary policy which is aimed at increasing AD (exports) to lead to growth
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35
Q

exports

A

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

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36
Q

export-led growth

A

economic growth arising from an increase in exports

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37
Q

fiscal policy

A

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

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38
Q

frictional unemployment

A

unemployment caused when people move between jobs and enter the job market
- short term

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39
Q

GDP

A

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

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40
Q

GDP per capita

A

total GDP divided by the population

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41
Q

Gross investment

A

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

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42
Q

GNI

A

the value of goods and services produced by a country over a period of time plus net overseas interest payments and dividends
- adds what a country earns from overseas investments
- removes what foreigners earn in a country and send home
(GDP + net income earned abroad)

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43
Q

GNP

A

the value of goods and services produced by citizens of a country, whether they live in the country or not, minus income earned by foreign residents

44
Q

Govt spending

A

spending by the govt for the provision of goods and services

45
Q

imports

A

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

46
Q

inactive

A
  • those neither employed nor unemployed
  • those not participating in the job market
47
Q

income

A

a flow of assets

48
Q

index number

A

numbers allowing accurate comparisons over time to be made. the base year value is normally 100

49
Q

indirect tax

A

tax where the person charged with paying the money to the govt is able to pass on the cost to someone else

50
Q

inflation

A

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

51
Q

injection

A

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

52
Q

interventionist supply side policies

A

policies designed to correct market failure, where govt intervenes in the market

53
Q

investment

A

addition of capital stock to the economy i.e. machines and factories used to produce other goods and services

54
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 definitions

55
Q

living standards

A

the quality of life enjoyed by people in a country

56
Q

long run

A

when all factors of production are variable

57
Q

LR trend rate of growth

A

the avg sustainable rate of economic growth over a period of time. what tends to happen over a long time (the avg)

58
Q

LRAS

A

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

59
Q

LR trend growth rate

A

the avg sustainable rate of economic growth over a period of time

60
Q

Marginal propensity to consume

A

the proportion of an increase in income spent on consumption

61
Q

MPC formula

A

(△ in consumption) / (△ in income)

62
Q

Marginal propensity to import

A

the proportion of an increase in income spent on imports

63
Q

marginal propensity to save

A

the proportion of an increase in income that is saved

64
Q

MPS formula

A

(△ in savings) / (△ in income)

65
Q

marginal propensity to tax

A

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

66
Q

marginal propensity to withdraw

A

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

67
Q

market based supply side policies

A

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

68
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

69
Q

Monetary policy committee

A

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

70
Q

monetary supply

A

stock of money in the economy

71
Q

multiplier process

A

an increase in an injection to the circular flow will lead to an even greater increase of national income

72
Q

multiplier ratio

A

ratio of the final change in income to the initial change

73
Q

multiplier formula

A

1 / (1-MPC) = 1 / MPW

74
Q

national expenditure

A

the value of spending by households on goods and services

75
Q

national income

A

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

76
Q

national output

A

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

77
Q

negative output gap

A
  • when GDP is lower than predicted
  • the economy is producing below full output
78
Q

net exports

A

exports minus imports

79
Q

net investment

A
  • investment adjusted for depreciation
  • gross investment minus depreciation
80
Q

nominal GDP

A
  • GDP which does not take inflation into account
  • GDP at current prices
81
Q

Macroeconomic objectives

A
  • low unemployment (less than 5%)
  • low and stable inflation (2%, +/- 1%)
  • economic growth @ similar to other econs,
    (strong, sustained, sustainable - 2.5%)
  • balanced
    (BoP equilibrium, including current acc. bal)
82
Q

output gap

A

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

83
Q

positive output gap

A
  • when GDP is higher than predicted
  • the economy is producing above full output
84
Q

potential growth

A

a change in the productive potential of the economy

85
Q

purchasing power parity

A

exchange rate of one currency to another that compares cost of living in different countries by comparing cost of a typical basket of goods
- big mac index (globally)

86
Q

quantitative easing

A

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

87
Q

real GDP

A

GDP which strips out the effect of inflation

88
Q

real wage unemployment

A

unemployment caused when wages are set above the equilibrium wage rate

89
Q

recession

A
  • the trough of the business cycle, when growth is low
  • the govt defines it as where real GDP falls in at least 2 successive quarters
90
Q

repo rate

A
  • the rate the bank of England will charge for short-term loans to other banks / financial institutions
91
Q

retail price index (RPI)

A

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

92
Q

Savings

A

the decision to postpone consumption

93
Q

seasonal unemployment

A

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

94
Q

short run

A

when at least one factor of production is fixed

95
Q

SRAS

A

aggregate supply when at least one factor of production Is fixed

96
Q

short-run Phillips curve

A
  • shows the relationship between unemployment and inflation
  • higher levels of unemployment leads to lower levels of inflation
97
Q

structural unemployment

A

unemployment caused by the long term decline of an industry
- when mismatch between skills and qualifications of available workers, and requirements of available jobs

98
Q

supply-side policies

A

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

99
Q

total GDP

A

the GDP of the whole country

100
Q

Trade (business) cycle

A

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

101
Q

underemployment

A

those who are working part-time, on zero-hour contracts or on govt 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

102
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)

103
Q

value of GDP

A
  • nominal values of GDP
  • GDP at current prices
104
Q

Volume of GDP

A
  • real values of GDP
  • GDP at current prices
105
Q

wealth

A

a stock of assets

106
Q

wealth effect

A
  • a change in consumption following a change in wealth
  • i.e People with more wealth tend to greater levels of consumption (or vice versa)
107
Q

withdrawal

A

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

Econ - MACRO (4 decks)

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