11 - Economic Performance Definitions

Question 1

External Shocks

Answer 1

Unanticipated occurrences in an economy, changing the direction of an economy.

Question 2

Foreign Direct Investment

Answer 2

The flow of capital from one country to another, to gain a lasting interest in enterprise.

Question 3

Human Capital

Answer 3

The economic value of a workers’ skills and experience.

Question 4

Hysteresis

Answer 4

An economic event which persists into the future, after factors which caused it are removed.

Question 5

Infrastructure

Answer 5

The systems of a business, region, or nation, involving the transportation of goods.

Question 6

Net Inward Migration

Answer 6

The difference between people entering and leaving a country.

Question 7

Positive Output Gap

Answer 7

When actual output is more than full capacity output.

Question 8

Negative output gap

Answer 8

When output is less than what an economy can produce at full capacity.

Question 9

Productivity

Answer 9

How much output can be produced with a certain set of inputs.

Question 10

Research and Development

Answer 10

Businesses gathering knowledge to discover new ways to improve their products.

Question 11

Stagflation

Answer 11

A mix of high inflation, and zero or negative growth.

Question 12

Sustainable Growth

Answer 12

Growth of output meeting the needs of the present without compromising the ability of future generations.

Question 13

Innovation

Answer 13

The act of improving existing products.

Question 14

Short Run Growth

Answer 14

Increase in GDP through an increase in AD.

Question 15

Long Run Growth

Answer 15

An increase in the productive capacity of an economy.

Question 16

Productive Capacity

Answer 16

The maximum possible output of an economy.

Question 17

Economic Cycle

Answer 17

The way an economy goes through the four stages of Boom, Slowdown, Recovery, and Recession.

Question 18

Boom

Answer 18

A short lived period of rapid economic growth.

Question 19

Slowdown

Answer 19

A steady decline of a country’s output, with a rise in unemployment.

Question 20

Recession

Answer 20

Two consecutive quarters of negative GDP growth, with high unemployment.

Question 21

Recovery

Answer 21

An economy starting to expand, with falling unemployment and rising disposable incomes.

Question 22

Trend Growth Rate

Answer 22

The average sustainable rate of economic growth.

Question 23

Frictional Unemployment

Answer 23

Unemployment caused by workers seeking a better job, or being between jobs. Mainly affects new entrants to the labour market.

Question 24

Transitional Unemployment

Answer 24

Individuals voluntarily choosing to leave their job, in search of a new one.

Question 25

Geographical Immobility of Labour

Answer 25

Barriers that people face moving from one area to another.

Question 26

Occupational Immobility of Labour

Answer 26

The inability of Labour to move, because of insufficient skills.

Question 27

Structural Unemployment

Answer 27

Caused by a lack of suitable skills for jobs available, as a result of things such as de-industrialisation.

Question 28

De-Industrialisation

Answer 28

A process of economic change, by the removal of industrial capacity in a country.

Question 29

Cyclical Unemployment

Answer 29

Involuntary unemployment due to a lack of Aggregate Demand for goods and services.

Question 30

Keynesian Unemployment

Answer 30

Inadequate overall demand leading to prolonged periods of high unemployment.

Question 31

Demand Deficient Unemployment

Answer 31

Occurs during economic downturns, due to consumers and businesses reducing spending.

Question 32

Seasonal Unemployment

Answer 32

Unemployment arising in different seasons of the year, caused by factors such as weather.

Question 33

Real Wage

Answer 33

Wages adjusted for inflation, in terms of the amount of goods and services that can be bought.

Question 34

Real Wage Unemployment

Answer 34

A theory which states that unemployment is caused by real wages being too high relative to the productivity of workers.

Question 35

Voluntary Unemployment

Answer 35

Occurs when workers are willing to work at current market wage rates, but they choose to remain unemployed, refusing job offers.

Question 36

Involuntary Unemployment

Answer 36

Occurs when workers are willing to work at the current wage rate, but there are no jobs available.

Question 37

Equilibrium Unemployment

Answer 37

Assumes that firms and workers maximise their payoffs, and wages are determined to exploit private gains.

Question 38

Natural Rate of Unemployment

Answer 38

The level of unemployment that occurs in an economy, when operating at full potential.

Question 39

Demand - Pull Inflation

Answer 39

Demand for goods and services exceeds the available supply of the goods and services available in the economy.

Question 40

Cost - Push Inflation

Answer 40

Overall prices rise due to increases in production costs such as wages and raw materials.

Question 41

Wage Cost Inflation

Answer 41

Wage increases causing inflation because the cost of producing goods and services goes up as companies pay their employees more.

Question 42

Import - Cost Inflation

Answer 42

Increases in the prices of imported fuels, materials and components increase domestic costs of production, leading to increases in the price of domestically produced goods.

Question 43

Emerging - Market Inflation

Answer 43

Inflation from emerging economies who's main exports are manufactured goods.

Question 44

Disinflation

Answer 44

A fall in the rate of inflation, not a fall in prices.

Question 45

Monetarists

Answer 45

Believe that money supply is the primary factor affecting demand in an economy.

Question 46

Quantity Theory of Money

Answer 46

States that the general price level of goods and services is directly proportional to the amount of money in circulation.

Question 47

Equation of Exchange

Answer 47

MV = PT.