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Economics > YEAR 1 MACRO DEFINITIONS > Flashcards

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
Q

what is demand pull inflation

A

where excessive growth in AD outstrips the economy’s ability to produce goods and services

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26
Q

what is government spending

A

the spending by gov on capital goods and services e.g healthcare

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27
Q

what is net exports

A

the value of exports - the value of imports

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28
Q

what is under-employment

A

people who are employed in roles they are over-qualified for or those working part time who wish to be working full time

29
Q

what is inflation

A

persistent or sustained increases in average price level over a period of time causing the value of money to decrease

30
Q

what is gross domestic product (GDP)

A

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
Q

what is the expenditure method of measuring GDP

A

the total value of all spending in an economy in a year

32
Q

what is the output method of measuring GDP

A

the total value of all goods and services produced in an economy in a year

33
Q

what is purchasing power parity (PPP)

A

a way of adjusting the exchange rates to take into account different costs of living in different countries

34
Q

what is the circular flow of income

A

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
Q

what is the accelerator effect

A

when there is an increase in investment that leads to an increase in AD

36
Q

what is monetary policy

A

the use of interest rates and the money supply to manipulate the level of aggregate demand in the economy

37
Q

what is quantitative easing

A

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
Q

what is the phillips curve

A

an inverse relationship between unemployment and inflation

39
Q

what is NAIRU

A

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
Q

What is the participation rate

A

the percentage of the population in work or actively looking for work

41
Q

what is employment

A

the number of people who are in a job and working inc self employment

42
Q

what is unemployment

A

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
Q

what is the claimant count

A

the number of people without a job and claiming job seekers allowance

44
Q

what is inactivity

A

people of working age without a job but not looking for work

45
Q

what is real wage unemployment

A

a situation where unemployment exists as wages are too high relative to the equilibrium wage rate that would clear the labour market

46
Q

what is cyclical unemployment

A

workers are unemployed due to low levels of AD in the economy

47
Q

what is seasonal unemployment

A

workers are temporarily unemployed due to low levels of demand at particular times of the year

48
Q

what is frictional unemployment

A

workers are temporarily unemployed because even though jobs exist they haven’t found it yet

49
Q

what is structural unemployment

A

the unemployed do not have the right skills for the jobs available

50
Q

what is the natural rate of unemployment

A

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
Q

what is FISCAL policy

A

the use of taxes and government spending to manipulate the level of aggregate demand in the economy and is controlled by the government

52
Q

Direct taxes

A

levied on income, wealth and profit
the burden cannot be passed on
e.g income tax, national insurance, capital gains

53
Q

Indirect taxes

A

levied on expenditure
the burden can be passed on
e.g VAT, excise duties on fuel, cigarettes

54
Q

progressive taxes

A

the proportion of income paid in tax increases as income rises

55
Q

regressive taxes

A

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
Q

proportional taxes

A

the proportion of income paid in tax remains constant as income changes

57
Q

what is interest

A

the reward for saving and the cost of borrowing

58
Q

what are index numbers

A

they show the percentage change in price/quantity from the base year

59
Q

what is crowding out

A

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
Q

what is discretionary fiscal policy

A

when a government chooses to increase or decrease taxes and government spending

61
Q

what are automatic stabilisers

A

when taxes and government spending automatically increase or decrease

62
Q

what is the balance of payments

A

a summary of all transactions between one country and the rest of the world over a year

63
Q

what do deflationary and contractionary policies aim to do and what are the different policies

A

decrease AD
monetary and fiscal policy

64
Q

what is expansionary policy and what are the policies

A

aimed to increase AD
monetary and fiscal policy

65
Q

what are supply side policies

A

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
Q

what are interventionist supply side policies

A

the government increases its role in the economy including government spending on infrastructure

67
Q

what are market based supply side policies

A

the gov reduces its role in the economy maybe by reducing laws and legislation

68
Q

what is the current account

A

the sum of a country’s balance of trade in goods and services, net income from abroad and net current transfers

Economics (6 decks)

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