Definitions A->D(e)

Question 1

What is absolute advantage?

Answer 1

A country has an absolute advantage if it can produce more of a good than other countries from the same amount of resources.

Question 2

What does the term accelerator refer to in macroeconomics?

Answer 2

A change in the level of investment in new capital goods induced by a change in national income or output.

Question 3

Define actual output.

Answer 3

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

Question 4

What is aggregate demand?

Answer 4

Total planned spending on real output in the economy at different price levels.

Question 5

What does aggregate supply represent?

Answer 5

The level of real national output that producers are prepared to supply at different average price levels.

Question 6

What is meant by aid in the context of macroeconomics?

Answer 6

Money, goods, and services given by the government or institutions to help another country.

Question 7

What are assets?

Answer 7

The resources which people or organisations own.

Question 8

Define automatic stabilisers.

Answer 8

Fiscal policy instruments that automatically stimulate aggregate demand in an economic downswing.

Question 9

What does availability of credit refer to?

Answer 9

Funds available for households and firms to borrow.

Question 10

What is the balance of payments?

Answer 10

A record of all the currency flows into and out of a country in a particular time period.

Question 11

What is the Bank Rate?

Answer 11

The rate of interest that the Bank of England pays to commercial banks on their deposits.

Question 12

What is balance of primary income?

Answer 12

Inward primary income flows comprising both inward-income flowing into the economy.

Question 13

What are bonds?

Answer 13

Financial securities sold by companies or governments as a form of long-term borrowing.

Question 14

What is balance of secondary income?

Answer 14

Current transfers, e.g., gifts of money, international aid, and transfers between countries.

Question 15

What is broad money?

Answer 15

The part of the money supply made up of cash and other liquid assets.

Question 16

What does balance of trade measure?

Answer 16

The difference between the money value of a country’s imports and its exports.

Question 17

What is a budget deficit?

Answer 17

Occurs when government spending exceeds government revenue.

Question 18

What is a balance of trade deficit?

Answer 18

When the money value of a country’s imports exceeds the money value of its exports.

Question 19

What is balance of trade in goods?

Answer 19

The part of the current account measuring payments for exports and imports of goods.

Question 20

What does balance of trade in services refer to?

Answer 20

The difference between the payments for the exports and imports of services.

Question 21

What is balance of trade surplus?

Answer 21

When the money value of a country’s exports exceeds the money value of its imports.

Question 22

What are capital markets?

Answer 22

Markets where securities such as shares and bonds are issued to raise medium- to long-term financing.

Question 23

What is capital ratio?

Answer 23

The amount of capital on a bank’s balance sheet as a proportion of its loans.

Question 24

What is a central bank?

Answer 24

A national bank that provides financial and banking services for its country’s government and banking system, implements the government’s monetary policy, and issues currency.

The Bank of England is the UK’s central bank.

Question 25

What is claimant count?

Answer 25

The method of measuring unemployment according to those people who are claiming unemployment-related benefits (Jobseeker's Allowance).

Question 26

What is a closed economy?

Answer 26

An economy with no international trade.

Question 27

What is a commercial bank?

Answer 27

A financial institution which aims to make profits by selling banking services to its customers. ## Footnote Also known as a retail bank or high-street bank.

Question 28

What is comparative advantage?

Answer 28

Measured in terms of opportunity cost. The country with the least opportunity cost when producing a good possesses a comparative advantage in that good.

Question 29

What is the consumer prices index?

Answer 29

The official measure used to calculate the rate of consumer price inflation in the UK, calculating the average price increase of a basket of 700 different consumer goods and services.

Question 30

What is consumption?

Answer 30

Total planned spending by households on consumer goods and services produced within the economy.

Question 31

What is contractionary fiscal policy?

Answer 31

Uses fiscal policy to decrease aggregate demand and to shift the AD curve to the left.

Question 32

What is contractionary monetary policy?

Answer 32

Uses higher interest rates to decrease aggregate demand and to shift the AD curve to the left.

Question 33

What are corporate bonds?

Answer 33

Debt security issued by a company and sold as new issues to people who lend long-term to the company. They can usually be resold second-hand on a stock exchange.

Question 34

What is corruption?

Answer 34

A barrier holding back economic growth and development, especially in less developed economies.

Question 35

What is cost-push inflation?

Answer 35

A rising price level caused by an increase in the costs of production, shown by a shift of the SRAS curve to the left. ## Footnote Also known as cost inflation.

Question 36

What is a coupon?

Answer 36

The guaranteed fixed annual interest payment, often divided into two 6-month payments, paid by the issuer of a bond to the owner of the bond.

Question 37

What is credit?

Answer 37

When a bank makes a loan, it creates credit. The loan results in the creation of an advance, which is an asset on the bank's balance sheet, and a deposit, which is a liability of the bank.

Question 38

What is a credit crunch?

Answer 38

Occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to obtain financing, and leads to a rise in the cost of borrowing.

Question 39

What is crowding out?

Answer 39

A situation in which an increase in government or public-sector spending displaces private-sector spending, with little or no increase in aggregate demand.

Question 40

What is a currency union?

Answer 40

An agreement between a group of countries to share a common currency, and usually to have a single monetary and foreign exchange rate policy.

Question 41

What does the current account measure?

Answer 41

All the currency flows into and out of a country in a particular time period in payment for exports and imports of goods and services, together with primary and secondary income flows. ## Footnote Previously known as income flows and transfers.

Question 42

What is a current account deficit?

Answer 42

Currency outflows in the current account exceed the currency inflows.

Question 43

What is a current account surplus?

Answer 43

Currency inflows in the current account exceed the currency outflows.

Question 44

What are customs unions?

Answer 44

Trading blocs in which member countries enjoy internal free trade in goods and possibly services, with all the member countries protected by a common external tariff barrier.

Question 45

What is a cyclical budget deficit?

Answer 45

The part of the budget deficit which rises in the downswing of the economic cycle and falls in the upswing of the cycle.

Question 46

What is cyclical unemployment?

Answer 46

Unemployment caused by a lack of aggregate demand in the economy, occurring when the economy goes into a recession or depression. ## Footnote Also known as Keynesian unemployment and demand-deficient unemployment.

Question 47

What is debt?

Answer 47

People's financial liabilities or money they owe.

Question 48

What is deficit financing?

Answer 48

Deliberately running a budget deficit and then borrowing to finance the deficit.

Question 49

What is deflation?

Answer 49

A continuing tendency for the average price level to fall.

Question 50

What is deindustrialisation?

Answer 50

The decline of manufacturing industries, together with coal mining.

Question 51

What is demand-pull inflation?

Answer 51

A rising price level caused by an increase in aggregate demand, shown by a shift of the AD curve to the right. ## Footnote Also known as demand inflation.

Question 52

What does demand side relate to?

Answer 52

The impact of changes in aggregate demand on the economy. ## Footnote Associated with Keynesian economics.

Question 53

What is demand-side fiscal policy?

Answer 53

Used to increase or decrease the level of aggregate demand through changes in government spending, taxation, and the budget balance.

Question 54

What is deregulation?

Answer 54

Involves removing previously imposed regulations. It is the opposite of regulation.

Question 55

What is capital?

Answer 55

Physical assets or resources that are used in the production of goods and services.