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Economics From the book > 8 economic performance > Flashcards

8 economic performance Flashcards

1
Q

economic recovery definition

A

when short-run economic growth takes place after a recession

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2
Q

demand-side economic growth definition

A

the impact of changes in aggregate demand on the economy

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3
Q

supply-side econoic growh definition

A

changes in the potential output of the economy which is affected by the available factors of production

e.g changes in the size of the labour force

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4
Q

trend growth rate definition

A

the rate at which output can grow, on a sustained basis, without putting pressure on inflation

annual percentage increase in the productive capacity of the economy

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5
Q

seasonal fluctuation definition

A

variation of economy activity resulting from seasonal changes in the economy

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6
Q

economic cycle definition

A

upswing and downside in aggregate economic activity taking place over 4-12 years

in order to be an economic cycle has to be longer than seasonal fluctuation

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7
Q

actual output definition

A

level of real output produced in the economy in a particular year

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8
Q

trend level of output definition

A

what the economy is capable of producing when working at full capacity

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9
Q

difference between trend level and actual output

A

actual output differs when there is positive or negative output gap

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10
Q

what is a boom

A

A period of economic activity characterised by an increase in the rate of real output growth and increasing inflation.

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11
Q

what is a trough

A

A sustained period of low economic growth which usually follows a recession and is usually associated with:

Low growth
High unemployment
Low inflation
Low levels of confidence

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12
Q

what is recovery

A

When an economy grows after a period of contraction.

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13
Q

what is a recession

A

negative real GDP growth for 2 or more consecutive quatres

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14
Q

what is a depression

A

A sustained reduction in economic activity and GDP that lasts for a long period of time (typically 2 years or more) and leads to very high levels of unemployment

aka a prolonged trough

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15
Q

output gap definition

A

the level of actual real output in the economy is greater pr lower than the trend output level

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16
Q

4 benefits of economic growth

A
  • increases standard of living
  • provides new and more environmentally friendly technologies
  • produces a fiscal dividend (more tax revenue from indirect tax and direct tax)
  • lead to a cycle of benefits (greater confidence, increased investment, better technology and capital, greater international competitiveness, higher profits)
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17
Q

5 costs of economic growth

A
  • uses up finite resources
  • leads to pollution
  • can widen inequalities and distribution of income and wealth
  • leads to urbanisation
  • growth in population, more people who are poor
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18
Q

frictional unemployment definition

A

unemployment that is usually short term and occurs when a worker switches between jobs, time lags

also known as transitional unemployment

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19
Q

geographical immobility of labour

A

when workers are unwilling or unable to move from one are to another in search of work

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20
Q

occupational immobility of labour

A

when workers are unwilling or unable to move from one type to another type of job

e.g because different skill set needed

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21
Q

structural unemployment definition

A

long-term unemployment occurring when some industries are declining, even though other industries may be growing, also occurs within a growing industries when capital increases and reduces the demand for labour and requires new skills

22
Q

what 2 ways is structural unemployment caused

A
  • unable to adapt to a change in demand, leads to more efficient competitors (geographical immobility of labour)
  • change in skills needed as industries change the way they produce goods (occupational immobility of labour)
23
Q

deindustrialisation definition

A

decline of manufacturing industries

24
Q

cyclical unemployment definition

A

unemployment caused by a lack of aggregate demand in the economy

25
Q

when does cyclical unemployment occur

A

when the economy goes into a recession or depression

26
Q

seasonal unemployment definition

A

unemployment arising in different seasons of the year, caused by factors such as the weather and christmas

27
Q

real wage definition

A

the purchasing power of the nominal wage

28
Q

real-wage unemployment definition

A

unemployment caused by real wages being stuck above the equilibrium real wage

29
Q

equilibrium unemployment definition

A

exists when the economy’s aggregate labour market is in equilibrium. it is the same as the natural level of unemployment

30
Q

natural rate of unemployment (NRU)

A

the rate of unemployment when the aggregate labour markets is in equilibrium

31
Q

what 2 unemployment’s make up the equilibrium unemployment

A
  • frictional
  • structural
32
Q

demand pull inflation definition

A

a rising price level caused by an increase in aggregate demand

33
Q

cost push inflation definition

A

a rising price level caused by an increase in the costs of production

34
Q

wage-cost inflation

A

a rising price level caused by an increase in wages and salaries

35
Q

import-cost inflation

A

a rising price level caused by an increase in the costs of imported energy, food, raw materials and manufactured goods

36
Q

monetarists

A

economists who argue that prior increase in the money supply is the cause of inflation

37
Q

quantity theory of money definition

A

oldest theory of inflation, which states that inflation is caused by a persistent increase in the supply of money

38
Q

equation of exchange definition

A

the stock of money in the economy multiplied by the velocity of circulation of money equals the price level multiplied by the quantity of real output in the economy

39
Q

equation of exchange formula

A

MV = PT

40
Q

What is M in the equation of exchange

A

money supply

41
Q

what is V in the equation of exchange

A

velocity of circulation, average number of times a unit of currency changes hands
- stable and doesn’t change unless incomes change

42
Q

what is P in the equation of exchange

A

average price of each transaction

43
Q

what is T in the equation of exchange

A

total number of transactions made
- relativly constant

44
Q

What can PT multiplied together relate to

A

nominal GDP

45
Q

what are the 2 effects of expectations on changes in the price level

A

inflation:
- prices higher next year, they will act now, more inflation
deflation:
- prices lower next year, won’t purchase yet, more deflation

46
Q

what are 4 costs/disadvantages of inflation

A
  • distributional effects (fixed incomes lose, strong bargaining position wins)
  • distortion of normal economic behavior (higher prices next year, buy/hoard goods now)
  • international competitiveness (inflation higher than other countries, exports more expensive)
  • show leather costs and menu costs (sl = spending time shopping around and checking prices, mc = firms adjusts price lists more often)
47
Q

current account deficit definition

A

occurs when currency outflows in the current account exceed currency inflows.
export less than import

48
Q

current account surplus definition

A

occurs when currency inflows in the current account exceed currency outflows
exports greater than imports

49
Q

balance of trade in goods definition

A

the part of the current account measuring payments for the exports and imports of good

50
Q

balance of trade in services definition

A

part of the current account and is the difference between the payments for the exports of services and the payments for the imports of services

51
Q

short-run Philips curve definition

A

relationship between the rate of inflation and the rate of unemployment

52
Q

long-run philips curve definition

A

a vertical curve located at the NRU
vertical point takes account of expectations in inflation

Economics From the book (11 decks)

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