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IB Economics HL 2013+ > Unit 2 Macroeconomics > Flashcards

Unit 2 Macroeconomics Flashcards

1
Q

aggregate demand

A

total spending in the economy, made up of consumption spending, Investment spending, government spending and net export spending

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2
Q

aggregate supply

A

total amount of domestic goods and services supplied by businesses and the government

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3
Q

business cycle

A

diagram showing the cyclical fluctuations in economic activity; the business cycle shows that economies typically move through a pattern of economic growth with the phases: recovery, boom, recession, trough

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4
Q

central bank

A

government’s bank; institution that is responsible for an economy’s monetary policy

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5
Q

circular flow of income model

A

simplified model of the economy that shows the flow of money through the economy

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6
Q

consumer price index

A

measure of the average rate of inflation which calculates the change in the price of a representative basket of goods and services purchased by the ‘average’ consumer

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7
Q

consumption

A

spending by households on consumer goods and services

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8
Q

cost-push inflation

A

persistent increase in the average price level as a result of increases in the costs of production and a decrease in aggregate supply

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9
Q

crowding out

A

situation where the government spends more than it receives in revenue and needs to borrow money, forcing up interest rates and ‘crowding out’ private investment and private consumption

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10
Q

cyclical unemployment

A

unemployment that exists when there is insufficient aggregate demand in the economy and wages do not fall to compensate for this; it is usually associated with a recession

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11
Q

deflation

A

persistent fall in the average price level

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12
Q

demand-pull inflation

A

persistent increase in the average price level as a result of increases in aggregate demand

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13
Q

demand-side policies

A

policies to change the level of aggregate demand in the economy in order to achieve macroeconomic goals

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14
Q

direct taxation

A

taxation imposed on people’s income or wealth, and on firm’s profits

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15
Q

distribution of income

A

concerned with how much of an economy’s total income different individuals receive

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16
Q

economic growth

A

growth of real output in an economy over time, usually measured as growth in GDP

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17
Q

fiscal policy

A

government policies concerning its taxation and expenditure; fiscal policy may be used to manage the level of aggregate demand and may be expansionary or contractionary

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18
Q

frictional unemployment

A

unemployment that occurs when people entering the workforce after leaving education, or people who have left one job and are searching for a new job

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19
Q

full employment

A

exists when the number of jobs available in an economy is equal to or greater than the number of people actively seeking work

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20
Q

full employment level of output

A

level of output that is produced by the economy when all factors of production are employed

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21
Q

gross domestic product GDP

A

total money value of all final goods and services produced in an economy in one year

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22
Q

GDP per capita

A

total money value of all final goods and services produced in an economy in one year per head of population

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23
Q

Gini coefficient

A

coefficient that measures the income inequality; it is the ratio of the area between the Lorenz curve and the line of absolute equality to the total area under the line of equality; the higher the figure, the more unequal the income distribution

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24
Q

gross national product GNP/ gross national income GNI

A

total money value of all final odds and services produced in an economy in one year, plus net property income from abroad

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25
Q

government spending

A

spending by governments on goods and services

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26
Q

green GDP

A

a measure of the total output of an economy having taken into account the environmental consequences (externalities) involved in the production of that output

27
Q

indirect taxation

A

tax on expenditure; it is added to the selling price of a good or service

28
Q

inflation

A

persistent increase in the average price level

29
Q

inflationary gap

A

gap that occurs when macroeconomic equilibrium occurs at a level that is above the full employment level of output

30
Q

infrastructure

A

capital typically provided by the government to make economic activity possible such as transportation and communications systems, water and power lines, and public institutions including schools

31
Q

injections

A

investment, government spending and export revenues that add spending to the circular flow of income

32
Q

interest rate

A

price of credit or borrowed money

33
Q

investment

A

spending by firms in capital goods

34
Q

Keynesian AS model

A

model showing the LRAS curve has three distinct phases; macroeconomic equilibrium may occur at a level of output that is less than full employment, and suggests that the economy remains at this level of output when there is no government intervention

35
Q

labour union

A

organization of workers whose goals include the improvement of working conditions and payments to workers

36
Q

leakages

A

savings, taxes and import spending that remove spending from the circular flow of income

37
Q

long-run aggregate supply LRAS

A

AS that is dependent upon the resources in the economy and that can only be increased by improvements in the quantity or quality of factors of production

38
Q

Lorenz curve

A

curve illustrating the distribution of income in an economy; the further the curve is from the line of absolute equality, the more unequal is the distribution of income

39
Q

monetary policy

A

government policies concerning an economy’s official interest rate and money supply; monetary policy may be used to manage the level of aggregate demand and may be expansionary or contractionary

40
Q

multiplier

A

amount by which an injection is multiplied in order to calculate the final addition to national income as a result of the injection

41
Q

natural rate of unemployment

A

rate of unemployment that is exists when the economy is at full employment level of output

42
Q

Neo classical AS model

A

model showing that the LRAS curve is vertical at the full employment level of output

43
Q

net national income NNP

A

GNP minus depreciation (capital consumption)

44
Q

nominal GDP

A

GDP, not adjusted for inflation

45
Q

Phillips curve in the short run

A

curve that illustrates the view that there is a short-run inverse relationship between the inflation rate and the unemployment rate

46
Q

Phillips curve in the long run

A

vertical line at the natural rate of unemployment that illustrates the view that there is no trade-off between the inflation rate and the unemployment rate

47
Q

privatisation

A

type of supply-side policy where the government sells public assets to the private sector

48
Q

progressive taxation

A

system of direct taxation where as income increases, the fraction of income paid as taxes
increases

49
Q

proportional taxation

A

system of direct taxation where as income increases, the fraction of income paid as taxes
remains constant

50
Q

real GDP

A

GDP, adjusted for inflation

51
Q

real wage unemployment

A

unemployment that exists when real wages in the economy get pushed up above their equilibrium, either by the government or by trade unions

52
Q

recessionary gap

A

gap that occurs when macroeconomic equilibrium occurs at a level that is less than the full employment level of output

53
Q

regressive taxation

A

system of direct taxation where as income increases, the fraction of income paid as taxes
decreases

54
Q

savings

A

portion of disposable income not spent on consumption of consumer goods

55
Q

seasonal unemployment

A

unemployment that exists when people are out of work because their usual job is out of
season, e.g. ski instructor in summer

56
Q

short-run aggregate supply SRAS

A

AS that varies with the level of demand for goods and services and that is shifted by changes in the costs of factors of production

57
Q

stagflation

A

situation where an economy facing stagnant growth, with high rates of unemployment and high rates of inflation

58
Q

structural unemployment

A

unemployment that exists when in the long term the pattern of demand and production methods change and there is a permanent fall in the demand for a particular type of labour

59
Q

supply-side policies

A

policies to shift the long-run aggregate supply curve to the right, thus increasing potential output in the economy

60
Q

transfer payments

A

payment from the government that is received when there is no good or service exchanged, e.g. unemployment benefits; transfer payments are a means of redistributing income in an economy

61
Q

underemployment

A

exists when workers are carrying out jobs for which they are overqualified or hen workers are employed part-time, even though they are available for full-time employment

62
Q

unemployment rate

A

number of unemployed workers expressed as a percentage of the total workforce

63
Q

unemployment

A

state of being without work, but wiling and able to work, and actively looking for a job

IB Economics HL 2013+ (4 decks)

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