Theme 2 - 1 Flashcards
(17 cards)
What does GDP stand for?
Gross Domestic Product
Total value of all output/goods and services produced in the economy over a period of time.
How is economic growth measured?
As the percentage rate of change in real GDP
It indicates the increase in the value of goods and services produced by an economy over a period of time.
What is a recession?
A fall in the value of the goods and services produced by an economy over a period of at least 6 months
Measured by a decrease of real GDP for two consecutive quarters.
Define inflation.
The rise in average prices in an economy over a year
It indicates that the purchasing power of money is decreasing.
What is disinflation?
A fall in the rate of inflation
Prices are still rising, but the rate of increase is lower.
What does deflation refer to?
The fall in average prices in an economy over a year
It indicates a decrease in the general price level.
What is the Consumer Price Index (CPI)?
A measure of the price level used in the UK and EU countries
Used by the Bank of England to measure inflation against its target of 2%+-1.
How is the inflation rate calculated?
As the percentage change in the consumer price index relative to a base year set equal to 100
This helps in understanding the change in cost of living.
What is the definition of unemployment?
The number of working age people who are out of work and looking for work within the last four weeks
Must be able to start work within the next two weeks.
What is the current account of the balance of payments?
A record of a country’s transactions in goods, services, investment income, and current transfers with the rest of the world
Indicates economic interactions with other countries.
Define exchange rate.
The value of a currency in terms of another
It affects international trade and investment.
What is a government budget?
The difference between annual tax revenue and government spending
A budget deficit occurs if spending exceeds revenue.
What is national debt?
The total stock of debt owed by the government
Increases when the government borrows to cover budget deficits.
Define income inequality.
The difference in incomes between those in the top 10% and those in the bottom 10%
Reflects disparities in wealth distribution.
What does environmental sustainability concern?
Whether environmental resources will be protected and maintained for future generations
Essential for long-term ecological balance.
What is fiscal policy?
Involves the manipulation of government spending and taxation to affect total demand in the economy
It is a demand-side policy.
What does monetary policy involve?
The use of changes in the base rate of interest and the money supply to influence the rate of growth of total demand and the rate of price inflation
It is also a demand-side policy.
