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macroeconomics > macroeconomics key terms > Flashcards

macroeconomics key terms Flashcards

1
Q

macroeconomics

A

a branch of economics that studies the overall performance and behaviour of the economy

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2
Q

inflation

A

a persistent or continuing rise in the average price level

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3
Q

economic growth

A

an increased potential level of real output the economy can produce over a period of time

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4
Q

circular flow

A

contunious movement of money, goods and services between households and firms

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5
Q

injections

A

spending entering the circular flow as a result of investment, government spending and exports

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6
Q

withdrawals

A

a leakage of spending power out of the circular flow into savings, taxation and imports

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7
Q

aggregate demand

A

total planned spending on real outout in the economy at different price levels

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8
Q

aggregate supply

A

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

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9
Q

Consumption

A

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

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10
Q

Investment

A

Total planned spending by firms on capital goods produced within the economy

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11
Q

Exports

A

Domestically produce goods or services sold to residents of other countries

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12
Q

Imports

A

Goods or services produced in other countries sold to residents of this country

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13
Q

Trade surplus

A

Occurs when a country’s exports exceeds its imports

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14
Q

Trade deficit

A

When a country’s imports exceed its exports

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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

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16
Q

Budget deficit

A

Because when the government spending exceeds government revenue this represents a net injection of demand into the circular flow

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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

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18
Q

GNI

A

Gross national income - The total income earned by countries residents including income from abroad

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19
Q

Savings ratio

A

The proportion of income that individuals or households save rather than spend

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20
Q

Multiplier effect

A

The relationship between the change in aggregate demand and the resulting generally large change in national income

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21
Q

Interest rate

A

Cost of borrowing money or the return on savings/investment

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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

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23
Q

Productive capacity

A

Maximum level of output that an economy can produce using its available resources and technology

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24
Q

Capital spending

A

Expenditure made by businesses or governments on acquiring or improving physical assets such as machinery

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25
Q

Current spending

A

Expenditure made by individuals or businesses or governments on goods and services for immediate consumption including wages utilities and Day to day operations

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26
Q

net trade

A

Difference between a country’s exports and imports of goods and services

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27
Q

External shocks

A

Unexpected events from outside of the economic system that have a significant impact on it

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28
Q

Foreign direct investment

A

Investment in capital assets in a foreign country by business with headquarters in another country

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29
Q

Human capital

A

Skills and knowledge and experience Possessed by the population which individuals contribute to the economy through work

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30
Q

Hysterics

A

Situation where the effects of a temporary shock that carry on after the initial cause has been removed

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31
Q

Infrastructure

A

Result of past investment common buildings, roads, bridges (Fixed capital), Needed for the economy to operate efficiently

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32
Q

Net inward migration

A

The difference between the number of people imigrating into a country and the number of people emigrating from the country

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33
Q

Positive output gap*

A

The level of actual real output in the economy is greater than the trend output level

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34
Q

Negative output gap*

A

Level of actual rule output in the economy is lower than the Trend output level

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35
Q

Productivity

A

Measure of output produced per unit of input

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36
Q

Research and development

A

Activities by firms to innovate and create new ideas or improve

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37
Q

Stagflation

A

Situation where there is both high inflation and high unemployment

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38
Q

Sustainable growth

A

Steady and balanced increase in economic activity over a long period of time

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39
Q

Innovation

A

Coming up with new ideas

40
Q

short run growth

A

growth of real output resulting from using scarce resources including Labour thereby taking up the slack in the economy

41
Q

long run growth

A

An increase in the economy’s potential level of rare output and outward movement of the economy’s ppf

42
Q

Productive capacity

A

Maximum level of output that an economy is capable of producing with resources available

43
Q

Economic cycle

A

Fluctuations of Economic activity in an economy over time

44
Q

boom

A

A period of rapid economic growth and expansion of real output rising faster than the trend rate of growth

45
Q

slowdown

A

The right of growth day accelerates reducing economic activity after a boom

46
Q

Recession

A

six months or more of negative economic growth or declining real national output

47
Q

Recovery*

A

A period of economic Improvement following a recession

48
Q

Trend growth rate

A

Right at which output can grow on a sustained basis without inflationary Pressures

49
Q

public sector borrowing

A

Amount of money borrowed by the government to finance its expenditures when its revenue falls short

50
Q

Demand side fiscal policy

A

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
Q

Deficit financing

A

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

52
Q

Expansionary fiscal policy

A

Uses fiscal policy to increase aggregate demand and to shift the A D curve to the right

53
Q

Contractionary fiscal policy

A

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

54
Q

Discretionary fiscal policy

A

Involves making discrete changes to government spending and taxation and the budget deficit to manage their level of aggregate demand

55
Q

sovereign Debt problem

A

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
Q

Supply side fiscal policy

A

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
Q

National debt

A

The stock of all past government borrowing that has not been paid back

58
Q

Cyclical budget deficit

A

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

59
Q

Cyclical budget surplus*

A

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
Q

Structural budget deficit

A

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
Q

Progressive taxation

A

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
Q

Principle of taxation

A

Also known as canon of taxation a criterion used for judging whether a tax is good or bad

63
Q

Regressive taxation

A

When the proportion of Income paid in tax falls as an income increases

64
Q

Proportional taxation

A

When the proportion of income paid in the tax stays the same as income increases

65
Q

Tax threshold

A

Income level at which an individual or or household becomes liable to pay income tax

66
Q

Direct tax

A

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
Q

Indirect tax

A

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
Q

bank rate

A

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

69
Q

Central bank

A

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
Q

Dividend

A

A dividend is a payment made by corporation to its shareholders usually in the form of cash or additional shares of stock

71
Q

Financial sector

A

Part of the economy that deals with the management creation and exchange of its financial assets

72
Q

Interest

A

Additional amount of money that is charged or earned when borrowing or lending money

73
Q

Monetary policy

A

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
Q

Quantitative easing

A

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
Q

supply side policies

A

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
Q

Supply side economics

A

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
Q

Interventionist policies

A

involve government intervention to overcome market failure. For example, higher government spending on transport, education and communication

78
Q

noninterventionist supply side policys

A

involve policies to increase competitiveness and free-market efficiency. For example, privatisation, deregulation, lower income tax rates, and reduced power of trade unions

79
Q

privatisation

A

selling of state owned assets to the private sector. For example, BT and Royal mail.

80
Q

Marketization / commercialisation

A

Involves shifting provision of goods or services from the non market sector to the market sector

81
Q

Deregulation

A

Involved removing previously imposed regulations opposite of regulation

82
Q

frictional unemployment/ transactional

A

Caused by workers seeking a better job or who are in a time in between jobs usually short term

83
Q

Geographical immobility of Labour

A

When workers are unwilling or unable to move from one area to another in search of work

84
Q

Occupational immobility of Labour

A

When workers are unwilling or unable to move from one type of job to another e.g., because different skills are needed

85
Q

Structural unemployment

A

A immobility of Labour due to long term change in the structure of an industry

86
Q

deindustrialization

A

The decline of manufacturing industries, together with coal mining

87
Q

Cyclical unemployment

A

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
Q

Keynesian unemployment

A

type of unemployment that occurs when aggregate demand in an economy is insufficient to create enough jobs for all willing and able workers.

89
Q

seasonal unemployment

A

Unemployment arising in different seasons of the year, caused by factors such as the weather and the end of the Christmas shopping.

90
Q

Real wage

A

wage rate adjusted for inflation or changes in purchasing power over time.

91
Q

real wage unemployment

A

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
Q

Voluntary unemployment

A

occurs when individuals choose not to work at the current wage rate and are capable of and willing to work. - economically inactive

93
Q

Involuntary unemployment

A

Occurs when workers are willing to work at the current market wage rates but there are no jobs available

94
Q

Equilibrium unemployment

A

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
Q

Natural rate of unemployment

A

The rate of unemployment when the aggregate labour market is in equilibrium

macroeconomics (12 decks)

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