Definitions Flashcards
(167 cards)
1
Q
Long-run economic growth
A
The expansion of the productive capacity of the economy
2
Q
Short run economic growth
A
an increase in real GDP
3
Q
nominal value
A
Value of an economic variable at current prices, without taking account of changing prices through time
4
Q
real value
A
value of an economic variable, taking account of changing prices throughout time
5
Q
real GDP
A
GDP at constant prices, taking account of prices through time
6
Q
nominal GDP
A
GDP at current prices without taking into account of changing prices over time
7
Q
GNI
A
Gross national income = GDP + net income from abroad
8
Q
Seasonal adjustment
A
A process whereby seasonal fluctuations in a variable are smoothed to reveal a trend
9
Q
GDP per capita
A
The average level of GDP per person
10
Q
productivity
A
measure of the efficiency of a factor of production
11
Q
Labour productivity
A
Measure of output per hour worked
12
Q
capital productivity
A
Measure of the output of capital
13
Q
total factor productivity
A
The average productivity of all factors. Measured as total output over total input
14
Q
human capital
A
the stock of skills and expertise that contribute to a workers productivity
15
Q
economic cycle
A
a phenomenon whereby GDP fluctuates around its underlying trend
16
Q
Recession
A
A situation where an economys real GDP falls in 2 consecutive quarters
17
Q
Inflation
A
The rate of change in the average price level
18
Q
Index number
A
A way of comparing the value of a variable with a base observation
19
Q
CPI
A
Consumer price index - measure of the general level of prices in the uk
20
Q
CPIH
A
CPI but taking into account housing costs
21
Q
deflation
A
A fall in the average level of prices
22
Q
disinflation
A
a fall in the rate of inflation
23
Q
Cost push inflation
A
Inflation caused by an increase in the costs faced by firms arising from the supply side of the economy
24
Q
Demand pull inflation
A
Inflation caused by an increase in AD
25
Money stock
The amount of money in the economy
26
In employment
People who are working for either: Firms/organizations or self-employed
27
Economically inactive
People of working age who are not looking to work
28
Discouraged workers
people who have stopped looking for employment due to the fact that they are unable to find it
29
Workforce
people who are economically active
30
unemployed
people who are economically active but are not employed
31
full employment
a situation where all people who are economically active are all willing and able to find work
32
Claimant count of unemployment
The number of people claiming JSA each month
33
JSA
Jobseekers allowance – a benefit for people who are looking for work and are not in full-time employment
34
ILO unemployment rate
measure of the percentage of people who are without jobs but are available and willing to work
35
Frictional unemployment
Unemployment that is associated with job search - people who are between jobs
36
Structural unemployment
Unemployment that arises because of changes in economic activity with the economy
37
Cyclical unemployment
Unemployment that arises during the downturn of the economic cycle e.g. recession
38
Demand-deficient unemployment
Unemployment that arises due to a lack of AD within an economy
39
seasonal unemployment
Unemployment that arises
40
Real wage inflexibility
An argument that is real wages do not decrease, the result is unemployment
41
Voluntary unemployment
A situation arising when an individual chooses not to work
42
Involuntary unemployment
A situation arising when an individual is unable to find employment
43
Balance of payments
a set of accounts showing the transactions conducted between
residents of a country and the rest of the world
44
Current account of the balance of payments
account identifying transactions in goods and services between the residents of a county and the rest of the worlds
45
Financial account of the balance of payments
account identifying transactions in financial assets between the residents of a country and the rest of the world
46
Capital account of the balance of payments
Account identifying transactions in physical capital between the residents of a country and the rest of the world
47
credit
money flowing into the country from a transaction
48
debit
money flowing out of the country from a transaction
49
monetary policy
Decisions made by government regarding monetary variables
50
money supply
the quantity of money that is in circulation in the economy
51
central bank
the banker to the government
52
Bank of England
UKs central bank
53
Transmission mechanism of monetary policy
the channel by which monetary policy affects AD
54
inflation targeting
an approach to monetary policy in which the central bank is given independence to set interest rates
55
Monetary policy committee
The part of the BOE responsible for monetary policy
56
bank rate
the interest rate the is set by the Monetary policy committee to influence inflation
57
Liquidity trap
a situation whereby interest rate cannot fall any lower, so monetary policy cannot affect AD
58
Quantitative easing`
A process by which liquidity in the economy is increased when the central bank purchases assets
59
Scarcity
A situation that arises due to unlimited wants but limited resources
Or when demand is greater than supply
60
Economic goods
Goods that are scarce
61
Free goods
Goods that are not scarce
62
poverty
A situation in which individuals lack the basic necessities of life
63
The basic economic problem
Scarcity - unlimited want limited resources
64
firms
businesses – an organization that produces output
65
households
a person or group of people who engage in economic activity as a single entity
66
government
the group of MPs responsible for implementing policy and laws
67
rationality
economic agents acting in their own best instrests
68
utility
the benefit derived from consumption
69
incentive
a motivating factor
70
positive statement
a factual statement
71
normative statement
a statement with a value judgement
72
Value judgement
a statement based on opinion
73
factor of production
resources used in the production process
74
trade-off
a situation in which one choice requires the sacrifice of the alternative
75
Opportunity cost
the value of the next best alternative
76
PPC
Production possibility curve - a curve showing the maximum combinations of goods or services that can be produced in a given time
77
capital goods
goods used as a part of the production process
78
consumer goods
goods produced for consumption
79
Resource allocation
the way in which a societies resources are deployed across their alternate uses
80
market economy
market forces are allowed to guide the allocation of resources within a society
81
centrally planned economy
the government guides resource allocation
82
mixed economy
a combination of market forces and government guides the allocation of resources in an society
83
capitalism
a system of production in which there is private ownership of productive resources
84
invisible hand
Term used by Adam smith to describe the way in which resources are allocated in a market economy
85
GDP
the value of all goods and services produced in a country per year
86
specialisation
the process of concentrating on a task or activity in order to become an expert in it
87
division of labour
a process whereby production is broken down into a sequence of stages and workers are assigned to each stage
88
market
A set of arrangements that allow transaction to take place
89
barter system
an economy without money
90
money as a medium of exchange
the function of money that enables transactions to take place
91
labour productivity
output per worker per unit of input
92
Marginal principle
the idea that economic agents make decisions based on changes from the existing
93
rational decision making
a decision that allows an economic agent to maximise their objective
94
marginal utility
the additional utility gained from consuming an extra unit of a good or service
95
law of diminishing marginal utility
states that the more units are consumed, the lower the marginal utility from consumption
96
tax
Theft – compulsory fees levied on individuals by firms or government
97
indirect tax
a tax levied on expenditure
98
direct tax
a tax levied on income
99
incidence of tax
the way in which the burden of tax is split between buyers and sellers
100
ad valorem tax
a tax levied on a commodity as a percentage of its selling price
101
specific tax
a tax of a fixed amount imposed on purchases of a commodity
102
excess burden of sales tax
the loss to society following a sales tax
103
polluter pays principle
an argument that a firm causing pollution should be charged for the externalities it causes
104
Government expenditure
AKA state provision – where the government decides which goods or services to produce and then spends money providing them
105
Price control
A legal maximum or minimum price
106
Price floor
A legal minimum price
107
Price ceiling
A legal maximimum price
108
Merger
2 or more firms joining to form a new firm
109
cartel
an agreement between firms on price and output with the intent of maximising profits
110
buffer stock
a scheme intended to stabilise the price of a commodity by buying excess supply when supply is high and selling when price is low
111
legislation
laws created by government to enforce regulations
112
regulation
rules created by government to control the activities of producers and consumers
113
prohibition
an attempt to prevent the consumption of a demerit good de declaring it illegal
114
imformation provision
when the government educates the public to help consumers make better choices
115
pollution permit system
a system for controlling pollution based on a market for permits that allows firms to pollute
116
property rights
legal control or ownership of a good
117
contracting
a situation in which the public sector places activities in the hands of a private firm and pays for provision
118
competitive tendering
a process by which the public sector calls for private firms to bid for contracts
119
public-private partnership
an arrangement by which a government service or private business venture is funded and operated through a partnership of government and private sector
120
Private finance initiative
a funding arrangement under which the private sector designs builds and operates an asset for the public sector in return for an annual payment from government
121
government faliure
a misallocation of resources arising from government intervention that causes a less efficient allocation of resources
122
ceteris paribus
the assumption that all else remains equal
123
Equilibrium
The point at which supply and demand are equal
124
Elasticity
The responsiveness of one factor to a change in price
125
PeD
Price elasticity of demand – How much demand will change given a change in price
126
PeS
Price elasticity of supply – How much supply will change given a change in price
127
XeD
Cross elasticity of demand – How much of one good/service will change given the change in price of another good/service
128
YeD
Income elasticity of demand – How much demand will change given a change in price
129
Relatively elastic
Elasticity greater than 1
130
Inelastic
Elasticity less than 1
131
Consumer surplus
the extra amount a consumer is willing to pay for a product above the price they actually do pay
132
Producer surplus
The different between what producers are willing and able to supply the good for and the price they actually charge
133
Inferior good
A negative YeD - as RDI increases sales fall
134
RDI
Real Disposable Income
135
Externality
An effect on a 3rd party
136
Negative externality of production
when the process of producing a good or service creates negative consequences to a 3rd party i.e. pollution from factories
137
Negative externality of consumption
when the process of consuming a good or service has a negative effect on a 3rd party i.e. smoking
138
Positive externality of production
when the process of producing a good or service positively affects a 3rd party i.e. more money into a community caused by workers spending more
139
Positive externality of consumption
when the process of consuming a good or service has a positive effect on a 3rd party i.e. lower pollution caused by people riding a bike instead of driving
140
MBP
Marginal private benefit – the benefit to a consumer from consumption of a good or service
141
MPC
Marginal private cost - the cost to the business to supply a good/service
142
MSB/MSC
Marginal social benefit/cost
143
Asymmetric information failure
When one party has access to information that the other doesn't e.g. a car salesman selling a dodgy car
144
Market failure
A situation in which the allocation of resources by the market inefficient
145
Moral hazard
A situation in which one party engages in risky behaviour or acts in bad faith because they know that another bears the economic consequences e.g. 2008 financial crisis
146
Merit goods
Merit goods are goods that will be under-consumed because people dont fully appreciate thier benefit
147
Demerit goods
Goods that are over-consumed because people dont fully understand the dangers that comes with them
148
Private goods
A good that can only be consumed by a single person, therefore there is a profit incentive to provide these goods
149
Public goods
commodities or services that are provided without profit to all members of a society
150
Non-rivalrous
The consumption of a good by one person does not reduce the amount for another person
151
Non-excludable
If it is consumed by one person it is impossible to prevent others from consuming it
152
Marginal cost of production
The cost of producing an extra unit of a good/service
153
Non-rejectable
Once it has been produced it the people benefiting from it cannot avoid consuming it e.g. if you like in the UK you must rely on the UK military to protect you
154
Free-rider
Someone who consumer who benefits from a goods or service without paying for it
155
Quasi-public good
A good that shows some traits of a public good but not others
156
Fine tuning (in respects to fiscal policy)
the process of maintaining a steady rate of economic growth over a sustained period of time by using monetary policy
157
AD
Aggregate demand the total value of every good and service demanded in the economy
158
The circular flow of income
The idea that all money circulates around the economy
159
National income
The value of all the goods produced in the economy in a given time
160
consumer confidence
the level of optimism that consumers have about the state of the economy
161
MPC
Marginal propensity to consume - the percentage of a change in income that consumers spend
162
Multiplier effect
When an initial change in AD has a larger effect on the level of national income
163
Accelerator theory
An increase in real GDP will lead to a proportionally higher increase in private sector investment
164
Austerity
A set of government policies designed to reduce the budget deficit
165
Fiscal policy
When the government directly uses Spending and Taxation to achieve their macroeconomic objectives
166
Balanced budget
Where Government spending = Taxation
167
Budget surplus
G < T
