macroeconomics key terms Flashcards
1
Q
macroeconomics
A
a branch of economics that studies the overall performance and behaviour of the economy
2
Q
inflation
A
a persistent or continuing rise in the average price level
3
Q
economic growth
A
an increased potential level of real output the economy can produce over a period of time
4
Q
circular flow
A
contunious movement of money, goods and services between households and firms
5
Q
injections
A
spending entering the circular flow as a result of investment, government spending and exports
6
Q
withdrawals
A
a leakage of spending power out of the circular flow into savings, taxation and imports
7
Q
aggregate demand
A
total planned spending on real outout in the economy at different price levels
8
Q
aggregate supply
A
the level of real national output that producers are prepared to supply at different average price levels
9
Q
Consumption
A
Total plan spending by households on consumer goods and services produced within the economy
10
Q
Investment
A
Total planned spending by firms on capital goods produced within the economy
11
Q
Exports
A
Domestically produce goods or services sold to residents of other countries
12
Q
Imports
A
Goods or services produced in other countries sold to residents of this country
13
Q
Trade surplus
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Occurs when a country’s exports exceeds its imports
14
Q
Trade deficit
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When a country’s imports exceed its exports
15
Q
Budget surplus
A
Occurs when the government spending is less than the government revenue this represents a net withdrawal from the circular flow
16
Q
Budget deficit
A
Because when the government spending exceeds government revenue this represents a net injection of demand into the circular flow
17
Q
GDP
A
Gross domestic product - the sum of all goods and services or the level of output produced in the economy over a period of time
18
Q
GNI
A
Gross national income - The total income earned by countries residents including income from abroad
19
Q
Savings ratio
A
The proportion of income that individuals or households save rather than spend
20
Q
Multiplier effect
A
The relationship between the change in aggregate demand and the resulting generally large change in national income
21
Q
Interest rate
A
Cost of borrowing money or the return on savings/investment
22
Q
Transfer payments
A
Payments made by the government to individuals or groups without expecting any goods or services in return for example welfare payments
23
Q
Productive capacity
A
Maximum level of output that an economy can produce using its available resources and technology
24
Q
Capital spending
A
Expenditure made by businesses or governments on acquiring or improving physical assets such as machinery
25
Current spending
Expenditure made by individuals or businesses or governments on goods and services for immediate consumption including wages utilities and Day to day operations
26
net trade
Difference between a country's exports and imports of goods and services
27
External shocks
Unexpected events from outside of the economic system that have a significant impact on it
28
Foreign direct investment
Investment in capital assets in a foreign country by business with headquarters in another country
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Human capital
Skills and knowledge and experience Possessed by the population which individuals contribute to the economy through work
30
Hysterics
Situation where the effects of a temporary shock that carry on after the initial cause has been removed
31
Infrastructure
Result of past investment common buildings, roads, bridges (Fixed capital), Needed for the economy to operate efficiently
32
Net inward migration
The difference between the number of people imigrating into a country and the number of people emigrating from the country
33
Positive output gap*
The level of actual real output in the economy is greater than the trend output level
34
Negative output gap*
Level of actual rule output in the economy is lower than the Trend output level
35
Productivity
Measure of output produced per unit of input
36
Research and development
Activities by firms to innovate and create new ideas or improve
37
Stagflation
Situation where there is both high inflation and high unemployment
38
Sustainable growth
Steady and balanced increase in economic activity over a long period of time
39
Innovation
Coming up with new ideas
40
short run growth
growth of real output resulting from using scarce resources including Labour thereby taking up the slack in the economy
41
long run growth
An increase in the economy's potential level of rare output and outward movement of the economy's ppf
42
Productive capacity
Maximum level of output that an economy is capable of producing with resources available
43
Economic cycle
Fluctuations of Economic activity in an economy over time
44
boom
A period of rapid economic growth and expansion of real output rising faster than the trend rate of growth
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slowdown
The right of growth day accelerates reducing economic activity after a boom
46
Recession
six months or more of negative economic growth or declining real national output
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Recovery*
A period of economic Improvement following a recession
48
Trend growth rate
Right at which output can grow on a sustained basis without inflationary Pressures
49
public sector borrowing
Amount of money borrowed by the government to finance its expenditures when its revenue falls short
50
Demand side fiscal policy
Use to increase or decrease the level of aggregate demand and shift the AD curve to the right or left through changes in government spending, taxation and the budget balance
51
Deficit financing
Deliberately running a budget deficit and then borrowing to finance the deficit
52
Expansionary fiscal policy
Uses fiscal policy to increase aggregate demand and to shift the A D curve to the right
53
Contractionary fiscal policy
Uses fiscal policy to decrease aggregate demand and shift the aggregate demand curve to the left
54
Discretionary fiscal policy
Involves making discrete changes to government spending and taxation and the budget deficit to manage their level of aggregate demand
55
sovereign Debt problem
This situation where a country is unable to meet its debt obligations which are payments it needs to make on its outstanding loans or bonds
56
Supply side fiscal policy
Used to increase the economy's ability to produce and supply goods through creating incentives to work, save, invest and be entrepreneurial. Interventionists supply side fiscal policies such as financing of retraining Schemes for unemployed workers are also designed to improve supply side performance
57
National debt
The stock of all past government borrowing that has not been paid back
58
Cyclical budget deficit
The part of the budget deficit which rises in the downswing of the economic cycle and falls in the upswing of the cycle
59
Cyclical budget surplus*
When a government's revenue exceeds its expenses during a period of economic growth It's called cyclical because it's influenced by the ups and downs of the economic cycle during times of economic expansion tax revenues tend to increase due to higher incomes and spending
60
Structural budget deficit
The part of the budget deficit which is not affected by the economic cycle but results from structural change in the economy affecting the government's finances and also from long term government policy decisions
61
Progressive taxation
System where the tax rate increases as the income level of an individual or household increases in other words the more money someone earns the higher percentage of their incomes they are required to pay in taxes
62
Principle of taxation
Also known as canon of taxation a criterion used for judging whether a tax is good or bad
63
Regressive taxation
When the proportion of Income paid in tax falls as an income increases
64
Proportional taxation
When the proportion of income paid in the tax stays the same as income increases
65
Tax threshold
Income level at which an individual or or household becomes liable to pay income tax
66
Direct tax
Attacks that cannot be Shifted by the person legally liable to pay the tax on to someone else. Taxes are levied on income and wealth
67
Indirect tax
a tax that can be shifted by the person legally liable to pay the tax on to someone else for example through raising the price of a good being sold by the tax payer and direct taxes are levied on spending
68
bank rate
The rate of interest that the Bank of England pays to commercial banks on their deposits held at the Bank of England
69
Central bank
The National Bank that provides financial and banking services for its country's Government and banking system as well as implementing the government's monetary policy and issuing currency. the Bank Of England is the uk central Bank
70
Dividend
A dividend is a payment made by corporation to its shareholders usually in the form of cash or additional shares of stock
71
Financial sector
Part of the economy that deals with the management creation and exchange of its financial assets
72
Interest
Additional amount of money that is charged or earned when borrowing or lending money
73
Monetary policy
The use by the government and its agent the Bank of England of interest rates and other monetary instruments to achieve the government's policy objectives
74
Quantitative easing
Monetary policy tool used by central banks to stimulate the economy involves the purchase of government bonds or other financial assets by the central bank which increases the money supply and lowers interest rates
75
supply side policies
Government economic policies which aim to make markets more competitive and efficient increase production potential and shift the long run aggregate supply curve to the right.
76
Supply side economics
A branch of free market economics arguing that the government policy should be used to improve the competitiveness and efficiency of markets and through this the performance of the economy
77
Interventionist policies
involve government intervention to overcome market failure. For example, higher government spending on transport, education and communication
78
noninterventionist supply side policys
involve policies to increase competitiveness and free-market efficiency. For example, privatisation, deregulation, lower income tax rates, and reduced power of trade unions
79
privatisation
selling of state owned assets to the private sector. For example, BT and Royal mail.
80
Marketization / commercialisation
Involves shifting provision of goods or services from the non market sector to the market sector
81
Deregulation
Involved removing previously imposed regulations opposite of regulation
82
frictional unemployment/ transactional
Caused by workers seeking a better job or who are in a time in between jobs usually short term
83
Geographical immobility of Labour
When workers are unwilling or unable to move from one area to another in search of work
84
Occupational immobility of Labour
When workers are unwilling or unable to move from one type of job to another e.g., because different skills are needed
85
Structural unemployment
A immobility of Labour due to long term change in the structure of an industry
86
deindustrialization
The decline of manufacturing industries, together with coal mining
87
Cyclical unemployment
Unemployment caused by the ups and downs of the economic cycle/ caused by lack of aggregate demand in the economy when the economy goes into a recession or depression
88
Keynesian unemployment
type of unemployment that occurs when aggregate demand in an economy is insufficient to create enough jobs for all willing and able workers.
89
seasonal unemployment
Unemployment arising in different seasons of the year, caused by factors such as the weather and the end of the Christmas shopping.
90
Real wage
wage rate adjusted for inflation or changes in purchasing power over time.
91
real wage unemployment
Unemployment is caused by wages being too high (above equilibrium market clearing real wage) relative to the productivity of workers, employers are unwilling to hire workers at the current wage level because they believe the workers aren't worth that much
92
Voluntary unemployment
occurs when individuals choose not to work at the current wage rate and are capable of and willing to work. - economically inactive
93
Involuntary unemployment
Occurs when workers are willing to work at the current market wage rates but there are no jobs available
94
Equilibrium unemployment
the level of unemployment that exists when the labor market is in a state of equilibrium, where the number of job seekers matches the number of job vacancies available.- Such as structural, frictional, seasonal.
95
Natural rate of unemployment
The rate of unemployment when the aggregate labour market is in equilibrium
96
HDI
life expectancy, educatiion and GDP per capita,
97
eco growth vs eco development
