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A Level Economics > Macro Year 1 > Flashcards

Macro Year 1 Flashcards

1
Q

Aggregate

2.2.1 - The characteristics of aggregate demand

A

The sum or total

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2
Q

Aggregate demand

2.2.1 - The characteristics of aggregate demand

A

The total of all demands or expenditures in the economy at any given price

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3
Q

Aggregate demand curve

2.2.1 - The characteristics of aggregate demand

A

Shows the relationship between the price level and equilibrium national income. As the price level rises the equilibrium level of national income falls

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4
Q

Domestic economy

2.2.1 - The characteristics of aggregate demand

A

The economy of a single country

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5
Q

Average propensity to consume

2.2.2 - Consumption

A

The proportion of total income spent
C/Y

C - Consumption
Y - Income

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6
Q

Average propensity to save

2.2.2 - Consumption

A

The proportion of a total income which is saved
S/Y

S - Savings
Y - Income

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7
Q

Consumption

2.2.2 - Consumption

A

Total expenditure by households on goods and services over a period of time

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8
Q

Consumption function

2.2.2 - Consumption

A

The relationship between the consumption of hosueholds and the factors which determine it

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9
Q

Disposable income

2.2.2 - Consumption

A

Income remaining after deduction of taxes

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10
Q

Durable goods

2.2.2 - Consumption

A

Goods which are consumed over a long period of time, such as a television set or car

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11
Q

Marginal propensity to consume

2.2.2 - Consumption

A

The proprotion of a change in income is spent
ΔC/ΔY

ΔC - Change in consumption
ΔY - Change income

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12
Q

Marginal propensity to save

2.2.2 - Consumption

A

The proportion of a change in income which is saved
ΔS/ΔY

ΔS - Chang in amount saved
ΔY - Change in income

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13
Q

Non-durable goods

2.2.2 - Consumption

A

Goods which are consumed alomsot immediately like an ice cream or a packet of washing powder

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14
Q

Savings function

2.2.2 - Consumption

A

The relationship between the saving of households and the factors which determine it

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15
Q

Saving (personal)

A

The portion of households’ disposable income which is not spent over a period of time

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16
Q

Wealth effect

2.2.2 - Consumption

A

The change in consumption following a change in wealth

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17
Q

Accelerator coefficient

2.2.3 - Investment

A

The capital-output ratio

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18
Q

Accelerator theory

2.2.3 - Investment

A

The theory that the level of investment is related to past changes in income

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19
Q

Animals spirits

2.2.3 - Investment

A

Business confidence: the modd of managers and owners of firms about the future of their industry and the wider economy

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20
Q

Capital-output ratio

2.2.3 - Investment

A

The ratio between the amount of capital needed to produce a given quantity of goods and the level of output

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21
Q

Depreciation (of the capital stock)

2.2.3 - Investment

A

The value of the capital stock which has been used up or worn out

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22
Q

Gross investment

2.2.3 - Investment

A

The addition to capital stock, both to replace the existing capital stock which has been used up (depreciation) and the creation of additional capital

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23
Q

Investment

2.2.3 - Investment

A

The addition to the capital stock of the economy

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24
Q

Net investment

2.2.3 - Investment

A

Gross investment minus depreciation

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25
Q

Retained profit

2.2.3 - Investment

A

Profit kept back by a firm for its own use which is not distributed to shareholders or used to pay taxation

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26
Q

Trade balance

2.2.4/5 - Government expenditure and net trade

A

Exports minus imports

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27
Q

Aggregate supply curve

2.3.1, 2.3.2, 2.3.3 - Aggregate Supply

A

The relationship between the average level of prices in the economy and the level of total output

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28
Q

Full capacity

2.3.1, 2.3.2, 2.3.3 - Aggregate Supply

A

The level of output where no extra production can take in the long run with existing resources. The full capacity level of output for an economy is shown by the classical long run aggregate supply curve or the vertical part of a keynesian aggregate supply curve

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29
Q

Long- run aggregate supply curve

2.3.1, 2.3.2, 2.3.3 - Aggregate Supply

A

The aggregate supply curve which assumes that wage rates are variable, both upward and downards. Classical or supply side economisits assume that wage rates are flexible. Keynesian economists assume that wage rates may be ‘sticky downwards’ and hence the economy may operate at less than full employment even in the long run

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30
Q

Short run aggregate supply curve

2.3.1, 2.3.2, 2.3.3 - Aggregate Supply

A

The upward sloping aggregate supply curve which assumes that money wage rates are fixed

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31
Q

Supply-side shocks

2.3.1, 2.3.2, 2.3.3 - Aggregate Supply

A

Factors such as changes in wage rates or commodity prices which cause the short run aggregate supply curve to shift

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32
Q

Circular flow of income

2.4.1, 2.4.2 - National income

A

A model of the economy which shows the flow of goods, services and factors and their payments around the economy

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33
Q

Closed economy

2.4.1, 2.4.2 - National income

A

An economy where there is no foreign trade

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34
Q

Income

2.4.1, 2.4.2 - National income

A

Rent. interest, wages and profits earned from wealth owned by economic actors

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35
Q

Injections

2.4.1, 2.4.2 - National income

A

In the circular flow of income, spending which is not generated by households including investment, government spending and exports

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36
Q

National income

2.4.1, 2.4.2 - National income

A

The value of the output, expenditure of income of an economy over a period of time

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37
Q

Open economy

2.4.1, 2.4.2 - National income

A

An economy where there is trade with other countries

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38
Q

Wealth

2.4.1, 2.4.2 - National income

A

A stock of assets which can be used to generate a flow of production or income. For example, physical wealth such as factories and machines is used to make goods and services

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39
Q

Withdrawaks or leakages

2.4.1, 2.4.2 - National income

A

In the circular flow of income, spending by households which does not flow back to domestic firms. It includes savings, taxes and imports

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40
Q

Marginal propenisty to import (MPM)

2.4.4 - The multiplier

A

The increase in imports divided by the income that caused them
ΔM/ΔY

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41
Q

Marginal propensity to save (MPS)

2.4.3 - Equilibrium levels of real national output

A

The increase in saving divided by the increase in income that caused it
ΔS/ΔY

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42
Q

Marginal propensity to tax (MPT)

A

The increase in tax revenues divided by the increase in incomme that caused them
ΔT/ΔY

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43
Q

Marginal propensity to withdraw

2.4.3 - Equilibrium levels of real national output

A

The increase in withdrawals from the circular flow (save, tax, import) divided by the increase in income that caused them; this is the same as the sum of the marginal propensity to save, tax and import (MPS + MPT + MPM)

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44
Q

Multiplier

2.4.3 - Equilibrium levels of real national output

A

The figure used to multiply a change in an injection into the circular flow, such as investment, to find the final change in income (assuming the injecttion is not determined by income). It is the ratio of final change in income to the initial change in an injection.

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45
Q

Multiplier effect

2.4.3 - Equilibrium levels of real national output

A

An increase in investment or other injection will lead to an even greater increase in income (assuming the injection is not determined by income)

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46
Q

Green GDP

2.1.1 - Economic Growth

A

A measure of GDP which takes account of the environmental costs of production such as pollution and resource depletion

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47
Q

Gross domestic product (GDP)

2.1.1 - Economic Growth

A

A measure of the output or value added of an economy which does not include output or income from investments abroad or an allowance for the depreciation of the nation’s capital stock

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48
Q

Gross national income (GNI)

2.1.1 - Economic Growth

A

The value of the goods and services produced by a country over a period of time (GDP) plus net overseas interest payments and dividends (factor incomes)

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49
Q

Gross national product (GNP)

2.1.1 - Economic Growth

A

The market value of goods and services produced over a period of time through the labour or property supplied by citizens of a country both domestically (GDP) and overseas

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50
Q

Hidden, black or informal economy

2.1.1 - Economic Growth

A

Econommic activity where trade and exchange take place but which goes unreported to the tax authorities and those collecting national income statistics

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51
Q

Net national income

2.1.1 - Economic Growth

A

A measure of national income which includes both net income from investments abroad and an allowance for depreciation of the nation’s capital stock

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52
Q

Per capita

2.1.1 - Economic Growth

A

Per individual in a population

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53
Q

Purchasing power parities

2.1.1 - Economic Growth

A

An exchange rate of one currency for another which compares how much a typical basket of goods in one country costs compared to that of another country

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54
Q

Standard of living

2.1.1 - Economic Growth

A

How well off is an individual, household or economy, measured by a complex mix of variables such as income, health, the environment, particiaption in society and political freedoms

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55
Q

Transfer payments

2.1.1 - Economic Growth

A

Income for which there is no corresponding output, such as unemployment benefits or pension payments

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56
Q

Value and volume of national income

2.1.1 - Economic Growth

A

The value of national income is its monetary value at the prices of the day; the volume is national income for inflation and is expressed either as an index number or in money terms at the prices in a selected base year

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57
Q

Actual growth

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

Economic growth as measured by recorded changes in real GDP over time

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58
Q

Boom or peak

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

Period of time when the economy is growing strongly and is operating above its productive potential

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59
Q

Demand-side shock

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

A sudden and large impact on aggregate demand

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60
Q

Depression or slump

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

A period of the trade cycle when either economic growth or GDP itself is falling

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61
Q

Downturn

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

A period of the trade cycle when either economic growth or GDP itself is falling

62
Q

Economic growth

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

A rise in output in an economy which can be either actual growth or potential growth

63
Q

Economic recovery

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

The movement back from where the economy is operating below its productive potential to a point where it is at its productive potential

64
Q

Export-led growth

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

A rise in aggregate demand caused by a rise in exports

65
Q

Hysteresis

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

The process whereby a variable does not return to its former value when changed. In terms of the trade cycle, it is used to describe the phenomenon of an economy failing to return to its former long term trend rate of growth after a severe recession

66
Q

Output gap

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

The difference between the actual level of GDP and the productive potential of the economy.

67
Q

Positive output gap

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

When the actual GDP is above the productive potential of the economy and it is in boom

68
Q

Negative output gap

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

When actual GDP is below the productive potential of the economy

69
Q

Potential growth

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

Economic growth as measured by the cahnges in the productive potential of the economy over time

70
Q

Recession

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

A period of the trade cycle when output or growth in output falls. The technical definition now used by the UK government is that a recession occurs when growth in output is negative for two successive quarters (i.e. two periods of 3 months)

71
Q

Spare capacity

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

For a whole economy, this exists when long run aggregate supply is greater than aggregate demadn so there is a negative output gap

72
Q

Supply-side shock

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

A sudden and large impact on aggregate supply

73
Q

Business cycle

2.5.1, 2.5.2, 2.5.3 - Causes of economic growth and the trade cycle

A

Regular flucuations in the level of economic activity around the productive potential of the economy. In business cycles, the economy veers from recession, when it is operating well below its productive potential, to booms when it is likely to be at or even above its productive potential

74
Q

Sustainable growth

2.5.4 - The impact of economic growht7

A

Growth in productive potential of the economy today which does not lead to a fall in the productive potential of the economy for future generations

75
Q

Anticipated inflation

2.1.2 - Inflation

A

Increases in prices which economic actors are able to predict with accuracy

76
Q

Consumer Prices Index (CPI)

2.1.2 - Inflation

A

A measure of the price level used across the European Union and used by the Bank of England to measure inflation against its target

77
Q

Cost-push inflation

2.1.2 - Inflation

A

Inflation caused by increases in the costs of production in the economy

78
Q

Deflation

2.1.2 - Inflation

A

A fall in the price level

79
Q

Demand-pull inflation

2.1.2 - Inflation

A

Inflation which is caused by excess demand in the economy

80
Q

Disinflation

2.1.2 - Inflation

A

A fall in the rate of inflation

81
Q

Hyper-inflation

2.1.2 - Inflation

A

Large increases in the price level

82
Q

Indexation

2.1.2 - Inflation

A

Adjusting the value of economic variables such as wages or the rate of interest in line with inflation

83
Q

Inflation

2.1.2 - Inflation

A

A general rise in prices

84
Q

Price level

2.1.2 - Inflation

A

The average price of goods and services in the economy

85
Q

Retail Prices Index (RPI)

2.1.2 - Inflation

A

A measure of the price level which has been calculated in the UK for over 60 years and is used in a variety of contexts such as by the government to index welfare benefits

86
Q

Unacticipated inflation

2.1.2 - Inflation

A

Increases in prices which economic actors like consumers and firms fail to predict accurately and so thier decisions are based on poor informion

87
Q

Active population

2.1.3 - Employment and unemployment

A

Those in work or activelt seeking work; also known as the labour force

88
Q

Participation rate

2.1.3 - Employment and unemployment

A

The number of those in work or unemployed divided by the population of working age expressed as a percentage

89
Q

Cyclical or demand-deficient unemployment

2.1.3 - Employment and unemployment

A

When there is insufficient demand in the economy for all workers who wish to work at current wage rates to obtain a job

90
Q

Employed

2.1.3 - Employment and unemployment

A

Those in paid work

91
Q

Employment rate

2.1.3 - Employment and unemployment

A

The number of those in work divided by the population of working age expressed as a percentage

92
Q

Frictional unemployment

2.1.3 - Employment and unemployment

A

When workers are unemployed for short lengths of time between jobs

93
Q

Full-time workers

2.1.3 - Employment and unemployment

A

Workers who work hours and the days which are the norm for a particular job

94
Q

Hidden unemployed

2.1.3 - Employment and unemployment

A

Partly those in the population who would take a job if offered, but are not in work and are not currently seeking work; and partly those who are underemployed

95
Q

Inactive

2.1.3 - Employment and unemployment

A

The number of those not in work and not unemployed

96
Q

Inactivity rate

2.1.3 - Employment and unemployment

A

The number of those not in work and not unemployed divided by the population of working age expressed as a percentgae

97
Q

Labour force

2.1.3 - Employment and unemployment

A

Those in work or actively seeking work; also know as the active population

98
Q

Long-term unemployed

2.1.3 - Employment and unemployment

A

In the UK, those unemployed for more than one year

99
Q

Part-time workers

2.1.3 - Employment and unemployment

A

Workers who only work a fraction of the hours and the days which are the norm for a particular job

100
Q

Population of working age

2.1.3 - Employment and unemployment

A

The total number of people aged between the statutory school leaving age and the state retirement age

101
Q

Real wage unemployment

2.1.3 - Employment and unemployment

A

When workers are unemployed because real wages are too high and inflexible downwards, leading to insufficient demadn for workers from employers

102
Q

Seasonal unemployment

2.1.3 - Employment and unemployment

A

When workers are unemployed at certain times of the year, such as building workers or agricultural workers in the winter

103
Q

Self-employed

2.1.3 - Employment and unemployment

A

Workers who work on their own account and are not employees

104
Q

Short-term unemployed

2.1.3 - Employment and unemployment

A

In the UK, those unemployed for less than a year

105
Q

Structural unemployment

2.1.3 - Employment and unemployment

A

When the pattern of demand and production changes leaving workers unemployed in labour markets where demand has shrunk. Examples of structural are regional unemployment, sectoral unemployment or technological unemployment

106
Q

Underemployed

2.1.3 - Employment and unemployment

A

Those who would work more hours if available or are in jobs which are below their skill level

107
Q

Unemployed

2.1.3 - Employment and unemployment

A

Those not in work but seeking work

108
Q

Unemployment

2.1.3 - Employment and unemployment

A

Occurs when individuals are without a job but are activelt seeking work

109
Q

Unemployment rate

2.1.3 - Employment and unemployment

A

The number of those not in work, but seeking work, divided by the labour force expressed as a percentage

110
Q

Balance of payments account

2.1.4 - Balance of payments

A

A record of all financial dealings over a period of time between economic agents of one country and all other countries

111
Q

Balance of trade

2.1.4 - Balance of payments

A

The value of visible exports minus visible imports

112
Q

Capital and financial accounts

2.1.4 - Balance of payments

A

That part of the balance of payments account where flows of savings, investment and currency are recorded

113
Q

Current account

2.1.4 - Balance of payments

A

That part of the balance of payments account where payments for the purchase and sale of goods and services are recorded

114
Q

Current balance

2.1.4 - Balance of payments

A

The difference between the value of total exports (visible and invisible) and total imports

115
Q

Current account deficit or surplus

2.1.4 - Balance of payments

A

A deficit exists when imports are greater than exports; a surplus exists when the value of exports are greater than imports

116
Q

Invisibles

2.1.4 - Balance of payments

A

Trade in services, transfers of income and other payments or receipts

117
Q

Visibles

2.1.4 - Balance of payments

A

Trade in goods

118
Q

Balanced budget

2.6.2 - Demand-side policies

A

A statement of spedning and income plans by government where spending is equal to its receipts, mainly tax revenues

119
Q

Bank of England base rate

2.6.2 - Demand-side policies

A

The rate of interest charged by the Bank of England to banks to borrow money overnight. It is the most important interest rate in the UK financial system because it influences other interest rates in the UK such as savings rate and rates of interest on loans by banks

120
Q

Budget

2.6.2 - Demand-side policies

A

A statement of the spending and income plans of an individual firm or government spending and taxation plans in the UK

121
Q

Budget deficit

2.6.2 - Demand-side policies

A

A deficit which arises because government spedning is greater than its receipts. Government therefore has to borrow money to finance the difference

122
Q

Budget surplus

2.6.2 - Demand-side policies

A

A government surplus arising from government spending being less than its receipts. Government can use the difference to repay part of the national debt

123
Q

Contractionary fiscal policy

2.6.2 - Demand-side policies

A

Fiscal policy which leads to a fall in aggregate demand

124
Q

Contractionary monetary policy

2.6.2 - Demand-side policies

A

Monetary policy which leads to a fall in aggregate demand

125
Q

Direct tax

2.6.2 - Demand-side policies

A

A tax levied directly on individuals or companies such as income tax or corporation tax

126
Q

Expansionary fiscal policy

2.6.2 - Demand-side policies

A

Fiscal policy which leads to an increase in aggregate demand

127
Q

Expansionary monetary policy

2.6.2 - Demand-side policies

A

Monetary policy which leads to a rise in aggregate demand

128
Q

Fiscal policy

2.6.2 - Demand-side policies

A

The use of taxes, government spending and government borrowing by government to achieve its objectives

129
Q

Fiscal stance or budget position

2.6.2 - Demand-side policies

A

Whether fiscal policy is expansionary, contractionary or neutral

130
Q

Indirect tax

2.6.2 - Demand-side policies

A

A tax levied on goods or services, such as value added tax, excise duties or council tax

131
Q

Instrument of policy

2.6.2 - Demand-side policies

A

An economic variable, such as the rate of interest, income tax rate or government spending on education, which is used to achieve a target of government policy

132
Q

Monetary policy

2.6.2 - Demand-side policies

A

The manipulation by government of monetary variables, such as interest rates and the money supply, to achieve its objectives

133
Q

National Debt

2.6.2 - Demand-side policies

A

The total accumulatedd borrowing of government which remains to be paid to lenders

134
Q

Neutral fiscal policy

2.6.2 - Demand-side policies

A

When changes to government spedning and taxation leave the overall budget surplus or deficit unchanged and have no effect on aggregate demand

135
Q

Public sector net borrowing (PSNB)

2.6.2 - Demand-side policies

A

The official name given to the difference between government spending and its receipts in the UK

136
Q

Public sector net debt (PSND)

2.6.2 - Demand-side policies

A

The official name given to the national debt in the UK

137
Q

Quantitative easing

2.6.2 - Demand-side policies

A

A monetary policy instrument where the central bank buys financial assets in exchange for money in order to increase borrowing and lending in the economy

138
Q

Rate of interest

2.6.2 - Demand-side policies

A

The price of money, determined by the demadn and supply of funds in a money market where there are borrowers and lenders

139
Q

Bottlenecks

2.6.3 - Supply-side policies

A

Supply-side constraints in a particular market in an economy which prevent higher growth for the whole economy

140
Q

Deregulation

2.6.3 - Supply-side policies

A

The process of removing governments controls from markets

141
Q

Industrial policy

2.6.3 - Supply-side policies

A

Government policy to promote and support individual firms which it considers are important for the growth of the economy

142
Q

Interventionist policies

2.6.3 - Supply-side policies

A

Government policies designed to correct market failures that are reducing the growth rate of the economy

143
Q

Labour market flexibility

2.6.3 - Supply-side policies

A

The degree to which demand and supply in a labour market respon to external changes (such as changes in demand for a product or in population size) to return to equilibrium

144
Q

Market-based policies

2.6.3 - Supply-side policies

A

Government policies designed to promote economic growth by reducing barriers to the efficient working of free markets

145
Q

Minimum wage

2.6.3 - Supply-side policies

A

The least amount an employer can pay one of its workers, usually expressed an an hourly wage rate

146
Q

Poverty or earnings trap

2.6.3 - Supply-side policies

A

Occurs when an individual is little better off or even worse off when gaining an increase in wages because of the combined effect of increased tax and benefit withdrawal

147
Q

Privatisation

2.6.3 - Supply-side policies

A

The sale of government organisations or assets to the private sector

148
Q

Red tape

2.6.3 - Supply-side policies

A

Rules and regulations issued by government which firms must adhere to operate legally

149
Q

Supply-side economics

2.6.3 - Supply-side policies

A

The study of how changes in aggregate supply will affect variables such as national income; in particular, how government microeconomic policy might cahnge aggregate supply through individual markets

150
Q

Supply-side improvements

2.6.3 - Supply-side policies

A

Changes in individual markets, such as investment by firms or improvements in the skills of workers which lead to an increase in long run aggregate supply withotu necessarily the intervention of government

151
Q

Supply-side policies

2.6.3 - Supply-side policies

A

Government policies designed to increase the productive potential of the economy and push the long run aggregate supply curve to the right

152
Q

Unemployment trap

2.6.3 - Supply-side policies

A

Occurs when an individual is little better off or even worse off when getting a job after being unemployed because of the combined effect of increased tax and benefit withdrawal

A Level Economics (7 decks)

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