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YEAR 1 MACRO DEFINITIONS Flashcards

1
Q

what is a recession

A

2 successive quarters where GDP growth in negative

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2
Q

what is cost push inflation

A

an increase in the cost of factors of production like wages or resources

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3
Q

what is a boom

A

a prolonged period of growth with high levels of GDP growth

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4
Q

what is a slump

A

a prolonged period of negative GDP growth

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5
Q

what is a recovery

A

2 successive quarters following a recession with positive GDP growth

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6
Q

what is the multiplier effect

A

when an initial injection/withdrawal leads to a proportionately greater change in aggregate demand

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7
Q

what is the positive multiplier

A

when an initial injection leads to a proportionally greater increase in AD

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8
Q

what is the negative multiplier

A

when an initial leakage/withdrawal leads to a proportionally greater decrease in AD

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9
Q

what is aggregate demand

A

the sum of all planned spending in an economy over a period of time

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10
Q

what is MPC

A

measures the proportion of extra income that is spent on consumption

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11
Q

what is MPS

A

the proportion of any extra income that is saved by consumers

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12
Q

what is MPT

A

the proportion of additional income that is taxed

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13
Q

what is MPM

A

the proportion of additional income that is spent on imports

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14
Q

what is national income

A

measures the total value goods and services produced in an economy over a period of time usually a year

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15
Q

what is economic growth and how is it measured

A

an increase in the productive potential of an economy
measured using GDP/real GDP

an increase in a country’s real GDP

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16
Q

what is consumption

A

the total spending of UK households on goods and services for their own private use

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17
Q

what are output gaps

A

the difference between an economy’s current output and its potential

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18
Q

what is actual economic growth

A

an increase in real GDP of an economy

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19
Q

what is potential economic growth

A

an increase in the productive capacity of an economy. A shift right of LRAS or PPF

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20
Q

what is export led growth

A

where economic growth is caused by increased exports

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21
Q

what is gross investment

A

the spending on capital goods by firms and creates future production capacity

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22
Q

what is net investment

A

the gross investment minus depreciation of capital assets

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23
Q

what is aggregate supply

A

the total of all planned production in the economy at each price level

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24
Q

what is real GDP

A

the total value of goods and services produced in the economy in a year taking the rate of inflation into account

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25
what is demand pull inflation
where excessive growth in AD outstrips the economy's ability to produce goods and services
26
what is government spending
the spending by gov on capital goods and services e.g healthcare
27
what is net exports
the value of exports - the value of imports
28
what is under-employment
people who are employed in roles they are over-qualified for or those working part time who wish to be working full time
29
what is inflation
persistent or sustained increases in average price level over a period of time causing the value of money to decrease
30
what is gross domestic product (GDP)
the total value of all goods and services produced in an economy in a year or the total value of all spending in an economy in a year
31
what is the expenditure method of measuring GDP
the total value of all spending in an economy in a year
32
what is the output method of measuring GDP
the total value of all goods and services produced in an economy in a year
33
what is purchasing power parity (PPP)
a way of adjusting the exchange rates to take into account different costs of living in different countries
34
what is the circular flow of income
a model of the economy showing the exchange of the factors of production between households and firms. It also shown the flow of income between households and firms
35
what is the accelerator effect
when there is an increase in investment that leads to an increase in AD
36
what is monetary policy
the use of interest rates and the money supply to manipulate the level of aggregate demand in the economy
37
what is quantitative easing
a form of expansionary monetary policy. the central bank purchases assets like government bonds from the market to increase the money supply and encourage lending and investment, which should boost economic activity
38
what is the phillips curve
an inverse relationship between unemployment and inflation
39
what is NAIRU
Non-Accelerating Inflation Rate of Unemployment it is the level of unemployment below which the rate of inflation might be expected to accelerate significantly
40
What is the participation rate
the percentage of the population in work or actively looking for work
41
what is employment
the number of people who are in a job and working inc self employment
42
what is unemployment
a person who is of working age without a job available to start within 2 weeks and has been looking for the past 4 weeks
43
what is the claimant count
the number of people without a job and claiming job seekers allowance
44
what is inactivity
people of working age without a job but not looking for work
45
what is real wage unemployment
a situation where unemployment exists as wages are too high relative to the equilibrium wage rate that would clear the labour market
46
what is cyclical unemployment
workers are unemployed due to low levels of AD in the economy
47
what is seasonal unemployment
workers are temporarily unemployed due to low levels of demand at particular times of the year
48
what is frictional unemployment
workers are temporarily unemployed because even though jobs exist they haven't found it yet
49
what is structural unemployment
the unemployed do not have the right skills for the jobs available
50
what is the natural rate of unemployment
the rate of unemployment when the labour market is in equilibrium at YFe. It is the difference between those who would like a job at a the current wage rate and those who are willing and able to take a job.
51
what is FISCAL policy
the use of taxes and government spending to manipulate the level of aggregate demand in the economy and is controlled by the government
52
Direct taxes
levied on income, wealth and profit the burden cannot be passed on e.g income tax, national insurance, capital gains
53
Indirect taxes
levied on expenditure the burden can be passed on e.g VAT, excise duties on fuel, cigarettes
54
progressive taxes
the proportion of income paid in tax increases as income rises
55
regressive taxes
the proportion of income paid in tax decreases as income rises e.g flat rate taxes on cigarettes take a greater share of a poorer person's income than a richer person's
56
proportional taxes
the proportion of income paid in tax remains constant as income changes
57
what is interest
the reward for saving and the cost of borrowing
58
what are index numbers
they show the percentage change in price/quantity from the base year
59
what is crowding out
when the government borrows there is a limited amount of loanable funds this means that any funds invested in government bonds leaves less available for investment in the uk private sector
60
what is discretionary fiscal policy
when a government chooses to increase or decrease taxes and government spending
61
what are automatic stabilisers
when taxes and government spending automatically increase or decrease
62
what is the balance of payments
a summary of all transactions between one country and the rest of the world over a year
63
what do deflationary and contractionary policies aim to do and what are the different policies
decrease AD monetary and fiscal policy
64
what is expansionary policy and what are the policies
aimed to increase AD monetary and fiscal policy
65
what are supply side policies
they aim to increase the potential output of the economy and shift the LRAS by increasing the quantity and quality of the factors of production
66
what are interventionist supply side policies
the government increases its role in the economy including government spending on infrastructure
67
what are market based supply side policies
the gov reduces its role in the economy maybe by reducing laws and legislation
68
what is the current account
the sum of a country’s balance of trade in goods and services, net income from abroad and net current transfers

Economics (3 decks)

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