Theme 2 – The UK Economy, Performance and Policies Flashcards
Actual growth
Economic growth measured by changes in real GDP
Aggregate demand (AD)
The total level of demand in an economy at any given price at a moment in time
Aggregate supply (AS)
The total amount of output in the economy at any given price at a moment in time
Animal spirits
The level of confidence of business owners
Balance of payments
A record of all financial dealings over a period of time between economic agents of one country and another
Boom
The peak of the business cycle, when growth is high
Budget deficit
When the government spends more money than it receives
Budget surplus
When the government receives more money than it spends
Circular flow
A model of the economy which shows the flow of goods and services, the factors of production and money around the economy
Claimant count
A measure of unemployment; the number of people receiving benefits for being unemployed
Consumer Price Index (CPI)
Official measure used to calculate the rate of inflation, using a weighted basket of goods
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 the current account is negative
Current account surplus
When more money enters the country than leaves, so the current account is positive
Deflation
A persistent fall in prices of goods and services
Deflationary policy
Fiscal or monetary policy which is aimed at reducing AD
Demand pull inflation
Inflation caused by an increase in AD
Direct tax
Taxes paid straight to the government by the individual taxpayer
Disinflation
A reduction in the rate of inflation
Disposable income
The money consumers have left to spend, after taxes have been taken away and benefits added
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
Expansionary policy
Fiscal or monetary policy which is aimed at increasing AD
Fiscal policy
The use of borrowing, government spending and taxation to manipulate the level 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 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 (GNP)
The value of goods and services produced by citizens of a country, whether they live in the country or not
Indirect tax
Tax where the person charged with paying the money to the government is able to pass on the cost to someone else
Inflation
The general rise in prices of goods and services 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 in the market
Long run aggregate supply (LRAS)
The total output an economy can produce when operating at full output
Marginal propensity to consume
The proportion of an increase in income spent on consumption
Change in consumption / change in income
Marginal propensity to import
The proportion of an increase in income spent on imports
Marginal propensity to save
The proportion of an increase in income that is saved
Marginal propensity to tac
The proportion of an increase in income that is taken away in tac
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
Monetary supply
Stock of money in the economy
Multiplier
An increase in an injection will lead to an even greater increase of national income
1 / (1-MPC) = 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
Net exports
Exports - imports
Potential growth
A change in the productive potential of the 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 banks buy assets in exchange for money in an attempt to increase the money supply
Real GDP
GDP which strips out the effect of inflation
Recession
The trough of the business cycle, when growth is low
Seasonal unemployment
Unemployment cause when an industry only operates during certain times of they year
Short run aggregate supply (SRAS)
Aggregate supply when at least one factor of production is fixed
Short run Phillips 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 and shifting LRAS to the right
Total GDP
The GDP of the whole country
