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Macroeconomics > Theme 2 Key Terms > Flashcards

Theme 2 Key Terms Flashcards

(100 cards)

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1
Q

Big Mac Index

A

The Big Mac index is a way of measuring Purchasing Power Parity (PPP)
between different countries. By converting the average national Big Mac
prices to U.S. dollars (S) the same goods can be informally compared.
This can tell us something about whether a currency is under or
overvalued in foreign exchange markets.

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2
Q

BRICS economies

A

The BRICS grouping – Brazil, Russia, India, China and South Africa –
short-hand for the rise of emerging markets. The BRICs have a bigger
share of world trade than the USA.

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3
Q

Constant prices

A

Constant prices tell us that the data has been inflation adjusted.

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4
Q

Economic cycle

A

Variations in the annual rate of growth of real national output (GDP) over time.

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5
Q

Economic development

A

Long run improvements in broad measures of income per capita,
education and health outcomes and reductions in extreme poverty,
hardship and inequality.

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6
Q

Economic growth

A

An increase in the real value of goods and services produced as measured
by the annual % change in real GDP. Also, a long-run increase in a
country’s productive capacity.

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7
Q

Economic shocks

A

Unpredictable events such as volatile global prices for oil, gas and
foodstuffs.

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8
Q

Economic stability

A

When growth, prices and unemployment do not change much from one
year to another.

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9
Q

Emerging markets

A

Term commonly used to describe the financial markets of developing
countries.

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10
Q

Full capacity output

A

Level of GDP where all available factor inputs are fully employed.

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11
Q

Globalisation

A

A process in which countries have become increasingly integrated and
inter-dependent.

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12
Q

GNI

A

Income generated from resources owned by inhabitants and businesses of
a country.

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13
Q

Green GDP

A

A popular term for environmentally adjusted gross domestic product.

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14
Q

Gross Domestic Product

A

Total monetary value of output, spending and factor incomes generated
within the geographical boundaries of a country in a given time period.

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15
Q

GDP per capita

A

National income per head of population, used as a baseline measure of
living standards, measured by total GDP/resident population.

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16
Q

Human Development Index

A

An index used to assess comparative levels of development in countries,
quantified in terms of literacy, life expectancy and purchasing power as
measured by real national income per capita (PPP adjusted).

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17
Q

Infrastructure

A

The transport links, communications networks, sewage systems, energy
plants and other facilities essential for the efficient functioning of a country
and its economy.

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18
Q

Lagging indicators

A

Indicators which tend to follow economic cycles e.g. unemployment.

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19
Q

Leading indicators

A

Indicators which predict future economic trends e.g. consumer confidence.

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20
Q

Macroeconomic performance

A

The overall performance measured by changes in output, investment,
prices, jobs, trade and living standards and also the distribution of income
and wealth.

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21
Q

Manufacturing

A

Manufacturing is one of the production industries, which also include
mining, electricity, water & waste management and oil & gas extraction. In 2019, the UK manufacturing sector accounted for 2.7 million jobs,11% of
total UK GDP.

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22
Q

National happiness

A

Societal and personal well-being looking beyond what an economy
produces, to areas such as health, relationships, education and skills,
housing quality, finances and the environment.

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23
Q

National income

A

The total income earned by all factors of production in an economy in a
given time frame.

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24
Q

Nominal GDP

A

Monetary value of all goods and services produced expressed at current
prices (i.e. unadjusted for the effects of inflation).

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25
Nominal Income
The level of income in a given time period (e.g. a year) which is unadjusted for the effects of inflation, also known as money income.
26
Per capita incomes
Income per head of the population – a measure of average living standards e.g. Gross national income per capita = GNI/total population.
27
Purchasing power
The buying power of a unit of currency. It is inversely related to the rate of inflation.
28
Purchasing power parity
PPP is an economic theory that compares different countries' currencies through a "basket of goods" approach. According to this concept, two currencies are in equilibrium—known as the currencies being at par— when a basket of goods is priced the same in both countries, taking into account the exchange rates. Your purchasing power is the same in this situation.
29
Real disposable income
Income after taxes and welfare benefits, adjusted for the effects of inflation.
30
Real GDP
Nominal GDP adjusted for price changes, expressed at constant prices.
31
Real income
Nominal income adjusted for price changes, expressed at constant prices.
32
Real income per capita
Real value of household income per head of population = real GDP divided by the resident population.
33
Service industries
The service industries include the retail sector, the financial sector, the public sector, business administration and cultural activities. In 2019, the service industries accounted for 80% of total UK GDP and accounted for 83% of jobs.
34
Consumer price index
The CPI is the UK government's preferred measure of inflation, it measures changes in the average cost of living for a representative household and is a weighted price index.
35
Cost push inflation
Inflation caused by rising costs of production either domestically or from importing raw materials at higher prices due to exchange rate depreciation.
36
CPIH inflation
CPIH is a measure of UK inflation introduced in 2017 that includes owner occupiers’ housing costs). These are the costs of housing services associated with owning, maintaining and living in one’s own home.
37
Creeping inflation
Small rises in the general price level over a long period, low positive rate of inflation.
38
Deflation
A persistent fall in the general price level of goods and services shown by a negative rate of inflation.
39
Demand pull inflation
Caused by an excess of AD over AS. “Too much money chasing too few goods”.
40
Disinflation
A fall in the rate of inflation but not sufficient to bring about deflation. Prices are still rising but at a slower rate, for example a drop in the annual inflation rate from 6% to 2%.
41
Inflation
A sustained increase in the general price level for goods and services.
42
Inflation expectations
The rate of increase of consumer prices expected by consumers. Expectations can then influence spending and saving decisions and also wage bargaining.
43
Inflation target
The Bank of England has a CPI inflation target, which is currently 2 per cent.
44
Inflationary pressures
Demand and supply-side pressures that can cause a rise in the general price level. Demand-pull inflationary pressure is greatest when actual GDP exceeds potential GDP causing a positive output gap. Cost-push inflationary pressure can arise from increases in unit wage costs, rising import prices and an increase in the prices of raw materials, fuel and components used in production.
45
Money supply
The entire quantity of a country's commercial bills, coins, loans and credit.
46
Price stability
Occurs when there is a low positive inflation rate of between 1-3% and price changes that do occur have little impact on day-to-day decisions of people and businesses.
47
Relative deflation
An economy with an inflation rate which is lower than comparable economies. Over time, a low relative rate of inflation can lead to improved price competitiveness.
48
Stagflation
A combination of slow growth and rising inflation. The most notable recent period of stagflation occurred during the 1970s, when world oil prices rose dramatically, and UK inflation rose at one point to nearly 30 per cent.
49
Wage price spiral
Where workers bid for higher wages because they have seen their real income eroded by rising prices. This can lead to a further burst of cost-push inflation.
50
Weights
Weights are used when calculating a weighted consumer price index. In the UK for example, the weights used are taken from the spending patterns revealed by data from the Family Expenditure Survey. Heavily weighted items such as transport costs, fuel bills and prices of foodstuffs have a bigger impact on the overall measure of CPI inflation.
51
Claimant Count
The number of people claiming unemployment-related benefits.
52
Cyclical unemployment
Unemployment caused by a persistent lack of aggregate demand for goods and services, where national output < potential output leading to a negative output gap.
53
Demand deficient unemployment
Also known as cyclical unemployment, occurs when planned demand is insufficient to generate a full-employment level of real national output, this is most likely to happen in a slowdown or recession.
54
Discouraged workers
People often out of work for a long time who give up on job search and who become economically inactive in the labour market. A cause of hidden unemployment.
55
Disguised unemployment
Also known as hidden unemployment, where part of the labour force is either left without work or is working in a redundant manner where worker productivity is essentially zero.
56
Economically active
Those who are unemployed and actively seeking employment.
57
Economically inactive
Those who are of working age but are neither in work nor actively seeking work.
58
Frictional unemployment
Those moving between jobs. Typically lasts for up to six months.
59
Full employment
When there enough job vacancies for all the unemployed to take work.
60
Human capital
Human capital is a measure of individuals’ skills, knowledge, abilities, social attributes, personalities and health attributes. These factors enable individuals to work, and therefore produce something of economic value.
61
Inactivity
The state of not producing an economic output.
62
International Labour Organisation
The ILO is a United Nations agency whose mandate is to advance social justice and promote decent work by setting international labour standards.
63
Job search
Process by which workers find appropriate jobs given their tastes and skills.
64
Labour Force Survey
The Labour Force Survey (LFS) is a study of the employment circumstances of the UK population. It is the largest household study in the UK and provides the official measures of employment and unemployment.
65
Labour shortages
When businesses find it difficult to recruit the skilled workers they need.
66
Labour supply
The number of people able, available and willing to work at prevailing wage rates.
67
Migration
The movement of people from one geographical location to another with the intention of settling in the new region.
68
Natural rate of unemployment
The equilibrium rate of unemployment = frictional + structural unemployment.
69
NEETs
‘NEET’ stands for young people aged 16-24 Not in Education, Employment or Training (NEET). 788,000 people aged 16-24 in the UK were NEETs in 2019, representing 11.3% of the age group.
70
Net inward migration
When the number of migrants coming into a country is higher than those leaving in a given time period – usually a year.
71
Real wage
Nominal wage adjusted for the effects of inflation.
72
Redundancy
Making someone redundant is to end their paid employment.
73
Seasonal unemployment
This occurs when people are unemployed at particular times of the year when demand for labour is lower than usual.
74
Structural unemployment
Unemployment that results from the decline in an industry which leaves people unemployed because they do not have the skills needed by industries that are growing.
75
Tight labour market
When demand for labour is high and there are shortages of labour. Businesses may have to offer higher wages to attract and keep the workers they need.
76
Under-employment
Workers are underemployed when they are willing to supply more hours of work than their employers are prepared to offer.
77
Unemployment rate
The unemployment rate is the proportion of the economically active population who are unemployed.
78
Unemployment trap
When the prospect of the loss of unemployment benefits dissuades those without work from taking a new job – creates a disincentives problem.
79
Unit wage costs
Labour costs per unit of output.
80
Zero-hours contract
An employment contract under which the employee is not guaranteed work and is paid only for work carried out.
81
Balance of payments
A record of all financial transactions between an economy and the rest of the world.
82
Balance of trade
The difference between the value of country’s exports and imports of goods and services combined.
83
Capital account
Formerly known as financial account, now a small section of the account which includes effects of debt forgiveness, sale/transfer of patents, copyrights, franchises, leases and other transferable contracts across borders.
84
Current account
Measures the difference between money and credit going in and out of an economy (through exports, imports and income paid on assets both home and abroad).
85
Current account deficit
When net external trade and income is negative leading to a net outflow of demand from the circular flow.
86
Current account surplus
When net external trade and income is positive, a net injection into the circular flow.
87
Cyclical trade deficit
A trade deficit that arises purely due to changes in the business cycle, for example many countries run a trade deficit when strong growth increases demand for imports.
88
Euro
The European single currency was created in 1999 and entered common circulation in 2002. As of 2019 there are 19 nations in the Euro Zone.
89
Exchange rate
Exchange rates are the price of one country’s’ currency in relation to another.
90
Export revenue
Sales from selling goods and services overseas, an injection of aggregate demand.
91
External competitiveness
External competitiveness is the ability of businesses to sell their goods and services at competitive prices in a foreign country / overseas market.
92
Hot Money
Money that flows freely and quickly around the world looking to earn the best rate of return. It might be invested in any asset whose value is expected to rise (e.g. property or shares) or placed in an account offering the best real rate of interest.
93
Net primary income
Part of the current account of the balance of payments, it measures the net flow of profits, interest and dividends from investments in other countries and net remittance flows from migrant workers.
94
Net secondary income
Part of the current account of the balance of payments, it includes overseas aid / debt relief, military grants and (for the UK) net payments to the European Union.
95
Net trade
The balance between the monetary value of exports and imports.
96
Overseas assets
Assets such as businesses, shares, property owned in overseas countries and which might generate a flow of primary income which is a credit item on the current account.
97
Protectionism
Restricting trade through tariffs and other forms of import controls such as quotas.
98
Remittances
Sending money to people in another country. For many lower-income nations, remittance income is now a big contribution to their Gross National Income (GNI).
99
Structural trade deficit
A trade deficit that arises due to supply-side weaknesses rather than a change in GDP or currency – usually caused by poor price and non-price competitiveness.
100

Macroeconomics (8 decks)

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