Definitions

Question 1

Activity rate

Answer 1

The proportion of the population which is either in work or registered as unemployed. It measures the extent of economic activity.

Question 2

Aggregate demand curve

Answer 2

Plots aggregate demand against price level, sloping downward from left to right to show higher demand at lower prices.

Question 3

Aggregate demand

Answer 3

Total demand for goods and services in the economy, including consumption, investment, government spending, and net exports.

Question 4

Aggregate supply curve

Answer 4

Plots the total amount of goods and services produced against price level. In the short run, it slopes upwards.

Question 5

Aggregate supply

Answer 5

Total goods planned to be produced in the economy. In the long run, it depends on resources and technology.

Question 6

Balance of (international) payments

Answer 6

Statement of all financial transactions into and out of a country over a period.

Question 7

Boom

Answer 7

Period of rapid economic growth. Firms expand, use less efficient resources, and inflationary pressures build.

Question 8

Circular flow of income

Answer 8

Describes the flow of income between firms and households.

Question 9

Claimant count measure of unemployment

Answer 9

The number of people receiving Job Seeker’s Allowance. May include part-time workers.

Question 10

Consumer Prices Index (CPI)

Answer 10

Government’s main inflation measure and the basis for the inflation target.

Question 11

Cost-push inflation

Answer 11

Inflation caused by rising production costs passed on to consumers.

Question 12

Credit crunch

Answer 12

Period when banks are reluctant to lend, often leading to high interest rates and economic downturn.

Question 13

Crowding-out

Answer 13

Idea that government borrowing raises interest rates, preventing private sector borrowing.

Question 14

Cyclical unemployment

Answer 14

Unemployment caused by downturns in the economy due to long-term fluctuations.

Question 15

Deflation

Answer 15

Sustained fall in the general price level, increasing the real value of debts.

Question 16

Demand-pull inflation

Answer 16

Inflation caused when demand exceeds potential output, allowing firms to raise prices.

Question 17

Depression

Answer 17

Severe and prolonged economic downturn, worse than a recession.

Question 18

Depreciation

Answer 18

Wearing out of capital assets. Related to replacement in gross investment.

Question 19

Deregulation

Answer 19

Reducing state intervention or removing red tape in markets.

Question 20

Distribution of income

Answer 20

How income is divided among different groups in society.

Question 21

Economic cycle

Answer 21

Fluctuations in economic activity over time, including booms and recessions.

Question 22

Economic forecasting

Answer 22

Using models to predict trends in economic indicators like growth and unemployment.

Question 23

Economic growth

Answer 23

Increase in the productive capacity of the economy, measured by growth in real GDP.

Question 24

Economic inactivity

Answer 24

People not in the labour force due to retirement, illness, education, or caring responsibilities.

Question 25

Economic welfare

Answer 25

Extent to which the economy provides people with what they need for well-being and satisfaction.

Question 26

Equilibrium level of national income, output and prices

Answer 26

Occurs when aggregate demand equals aggregate supply. There is no tendency for output or price to change.

Question 27

Exchange rates

Answer 27

Rate at which one currency is exchanged for another in global markets.

Question 28

Fiscal policy

Answer 28

Government policy on spending and taxation to influence the economy.

Question 29

Fixed capital formation

Answer 29

Increase in stocks of productive assets, like machinery or equipment.

Question 30

Frictional unemployment

Answer 30

Unemployment during transitions between jobs or after graduating.

Question 31

Gini coefficient

Answer 31

Measures inequality in income distribution using the Lorenz curve.

Question 32

Government expenditure

Answer 32

Spending by the government, divided into current and capital spending.

Question 33

Gross investment

Answer 33

Total investment in capital assets, including replacement of worn-out assets.

Question 34

Gross domestic product (GDP)

Answer 34

Total value of goods and services produced in an economy over a year.

Question 35

Gross national product (GNP)

Answer 35

Measure of total spending power in the economy, obtained by adding net property income from abroad to GDP.

Question 36

Inflation

Answer 36

A significant and persistent rise in the general price level, reducing purchasing power.

Question 37

Infrastructure

Answer 37

Network of capital assets like transport and communications systems necessary for economic activity.

Question 38

Injections

Answer 38

Money entering the circular flow of income: investment, government spending, and exports.

Question 39

Interest rate

Answer 39

The cost of borrowing money or the reward for saving it, determined by loan conditions and risk.

Question 40

International Labour Organisation

Answer 40

UN agency providing guidelines for uniform and unbiased unemployment statistics.

Question 41

Keynesian economists

Answer 41

Economists who support demand-side policies and government intervention for economic stability.

Question 42

Labour Force Survey

Answer 42

Survey used to compile unemployment statistics in the UK and EU.

Question 43

Labour productivity

Answer 43

GDP per hour worked. Can vary due to skill, capital quality, or management.

Question 44

Leakages

Answer 44

Money flowing out of the circular flow through savings, taxation, and imports.

Question 45

Lorenz curve

Answer 45

Graphical representation of income inequality in a population.

Question 46

Macroeconomic stability

Answer 46

Maintaining stable growth while avoiding booms and recessions.

Question 47

Macroeconomics

Answer 47

The study of the economy as a whole, including total income, expenditure, and output.

Question 48

Monetary policy

Answer 48

Policy on credit and interest rates used to control demand and inflation.

Question 49

Monetary Policy Committee

Answer 49

UK body that sets interest rates to meet inflation targets.

Question 50

Natural rate of unemployment

Answer 50

The unemployment rate at which inflation is stable in the long term.

Question 51

Neoclassical economists

Answer 51

Support supply-side policies, emphasizing efficiency and free markets.

Question 52

Net investment

Answer 52

Spending on new capital assets, excluding replacements for worn-out ones.

Question 53

Net national product (or national income)

Answer 53

GNP minus depreciation; reflects the income earned by a nation's resources.

Question 54

Office for National Statistics

Answer 54

UK government agency for collecting official statistics.

Question 55

Output gap

Answer 55

Difference between actual and potential output. Can be positive or negative.

Question 56

Per capita

Answer 56

Per person (e.g., GDP per capita).

Question 57

Policy conflicts

Answer 57

When achieving one policy objective harms another, like inflation vs. unemployment.

Question 58

Production possibility frontier

Answer 58

Shows potential output assuming efficient use of resources and opportunity costs.

Question 59

Purchasing Power Parity

Answer 59

Exchange rate adjusted for domestic purchasing power differences.

Question 60

Rate of inflation

Answer 60

Percentage increase in the general price level over time.

Question 61

Real values

Answer 61

Values adjusted for inflation, showing true changes in economic variables.

Question 62

Recession

Answer 62

Period of negative economic growth, officially two consecutive quarters of GDP decline.

Question 63

Recovery

Answer 63

Phase after recession with small but steady improvements in output and employment.

Question 64

Redistribution of income

Answer 64

Government efforts to reduce income inequality through taxation and welfare.

Question 65

Retail Prices Index (RPI)

Answer 65

Another inflation measure including mortgage interest and council tax.

Question 66

Seasonal unemployment

Answer 66

Joblessness at certain times of year, common in tourism or agriculture.

Question 67

Slump

Answer 67

See 'Recession'.

Question 68

Structural unemployment

Answer 68

Long-term unemployment due to shifts in industry or outdated skills.

Question 69

Supply-side policy

Answer 69

Policies to increase efficiency and production by improving market operations.

Question 70

Taxation

Answer 70

Compulsory payment to the government, including direct (income tax) and indirect (VAT) taxes.

Question 71

Trade-off

Answer 71

Situation where improving one goal worsens another, e.g., inflation vs. unemployment.

Question 72

Unemployment

Answer 72

People able and willing to work but unable to find jobs. Measured by ILO or claimant count.

Question 73

Withdrawals

Answer 73

See 'Leakages'.