Key Terms Flashcards
(48 cards)
AAA credit rating
The best credit rating that can be given to a corporation’s or a government’s bonds, effectively indicating that the risk of default is negligible
AS shock
Either an inflation shock or a shock to potential national output; adverse AS shocks of both types reduce output and can increase the rate of inflation
Austerity
Economic policy aimed at reducing a government’s deficit (or borrowing)
Automatic stabilisers
Automatic fiscal changes as the economy moves through stages of the business cycle
Bank run
When a large number of people suspect that a bank may go bankrupt and withdraw their deposits.
Bond
Both companies and governments can issue bonds. The issue of new government debt is done by the central bank and involves selling debt to capital markets.
Bubble
When the prices of securities or other assets rise so sharply and at such a sustained rate that they exceed valuations justified by fundamentals, making a sudden collapse likely
What is capacity utilisation
It measures how much of the productive potential of the economy is being used. Utilisation fails during a recession leading to a rise in spare capacity.
Capital market
A stock of a bond market where firms can raise money for investment purposes
Capital stock
The value of the total stock of capital inputs in the economy
Closed economy
An economy operating without imports and exports - closed to global trade
Credit crunch
Where banks reduce lending due to falling confidence that loans will be repaid
Current account
The overall balance of credits minus debits for trade in goods, trades in services, investment income and transfers
Current account deficit
Money going out of s country is more than the amount coming in
Cyclical trade deficit
A trade deficit that arises purely due to changes in the economy’s cycle
Cyclical unemployment
Unemployment caused by a lack of AD for goods and services
Default
A default occurs when a borrower has broken the terms of a loan or other debt
Discretionary fiscal policy
Deliberate attempts to affect AD using changes in government spending, direct and indirect taxation and borrowing
Double dip recession
When an economy goes into recession twice without a full recovery in between
Economic shocks
Unpredictable events such as volatile prices for oil, gas and foodstuffs
Expenditure switching policy
Policies designed to switch expenditure from imports to domestically produced goods in order to improve the BoP and stimulate GDP
Fine-tuning
Changes in monetary policy or fiscal policy designed to gradually manage the level of AD and prices
Fiscal stimulus
Government measures, normally involving increased public spending and lower direct and/or taxation, aimed at giving a positive jolt to economic activity
Hard landing
A full scale recession shown by a decline in RNO
