Unit 7 - Section 5: Analysing The External Environment, Economic Change Flashcards
Economy
Production, distribution, or trade, and consumption of goods and services by different agents in a given geographical location
Gross domestic product (GDP)
Measures the value of a country’s total output over a period of time
Business cycle
The periodic but irregular up and down movements in economic activity
Boom
When economic activity peaks
Recession
When the economy contracts. Defined as two consecutive quarters of negative growth in GDP
Slump
When economic activity is at its lowest point in the business cycle
Recovery
When there is an expansion in economic activity
Exchange rate
The price of one currency in terms of another
Balance of payments
Compares the value of imports to exports over a period
Imports
Goods and services produced abroad and brought into the UK
Exports
Goods and services produced in the UK and sold abroad
Inflation
An increase in the general levels of price in the economy resulting in a fall in the purchasing power of money
Real income
The purchasing power of pay. Pay increases compared to price increases
Nominal income
The amount that wages and salaries rise
Cost push inflation
General price rises caused by rising costs
Demand pull inflation
General price rises caused by high demand for goods and services
Wage price spiral
How raising wages drive up costs and therefore cause inflation
Hyperinflation
The value of money decreases so fast that people lose confidence in it
Fiscal policy
The way the government tax and spend
Monetary policy
Now demand is controlled by limiting the money supply usually by using interest rates or quantitative easing
Open trade
Countries that are open trade freely with those around them
Protectionism
How the government of a country tried to restrict imports
Tariff
Tax on imports
Quota
A limit on the amount of goods that can be imported
Embargo
A ban on trade with a certain country
Subsidies
Where home industry receives payments to combat imported goods
EU
The European Union a trade bloc where there is free movement of people, capital and goods and services
Emerging markets
Countries growing quickly economically. Currently India, China, Russia and Brazil
Expansionary fiscal policy
When the government starts cutting taxes and increasing expenditure
Contractionary fiscal policy
When the government is reducing expenditure and increase taxes
Direct taxation
Levied on a person or organisation
Indirect taxation
Charged on goods and services
Current account deficit
When the government raise less from tax than it spends on the economy
Quantitative easing
The government buys assets (usually bonds). This allows the institutions selling these assets to have new money available
Forward guidance
The Bank of England communicate forecasts and expectations of changes in interest rates to influence business and consumer behaviour
Supply-side policy
A range of long term measures to increase the amount of economic activity
Globalisation
A term to describe the trend that markets are becoming worldwide in scope
