year 1 macro definitions

Question 1

circular flow of income

Answer 1

The idea that money is passed between economic agents

Question 2

National income

Answer 2

The total value of a countries goods and services produced in a year

Question 3

Aggregate demand

Answer 3

The combined value of every good and service demanded in an economy at a time

Question 4

Consumption

Answer 4

The amount of money spent on goods and services by households

Question 5

Investment

Answer 5

Any addition of capital stock to an economy

Question 6

Injections

Answer 6

things that add value to AD

Question 7

Leakages

Answer 7

Things that reduce AD

Question 8

MPC

Answer 8

Marginal propensity to consume - how much of a change in income consumers spend

Question 9

Consumer confidence

Answer 9

The level of faith that consumers have in regards to the economy (affects c)

Question 10

Business confidence

Answer 10

The level of faith that investors have in businesses (affects I)

Question 11

Aggregate supply

Answer 11

Describes national output

Question 12

Interest rates

Answer 12

reward for saving

Question 13

The multiplier

Answer 13

When an initial change in AD causes a larger change in the overall level of national income

Question 14

Accelerator

Answer 14

An increase in real GDP will cause a larger increase in private sector investment

Question 15

Average propensity to save/consume/tax/import

Answer 15

The % of income that consumers save/consume/lose via tax/spend on imports

Question 16

Output gap

Answer 16

The difference between Y and Yfe

Question 17

austerity

Answer 17

cutting public services to reduce the debt

Question 18

Fiscal policy

Answer 18

Policy made by government involving spending and taxation

Question 19

Monetary policy

Answer 19

Policy involving the supply of money in an economy

Question 20

Supply side policy

Answer 20

Policies affecting supply

Question 21

Budget

Answer 21

A financial plan for the next fiscal year

Question 22

direct tax

Answer 22

tax on earnings

Question 23

Indirect tax

Answer 23

Tax on spending

Question 24

progressive tax

Answer 24

% of income paid in tax increases with income

Question 25

Proportional tax

Answer 25

% of income paid is constant

Question 26

regressive tax

Answer 26

% of income paid decreases as income increases

Question 27

Budget surplus

Answer 27

When the level of spending is lower than the amount raised by taxation

Question 28

Budget deficit

Answer 28

When the government spends more money than it makes by taxation

Question 29

Public sector net borrowing

Answer 29

the amount of money the government borrows in a year

Question 30

structural deficit

Answer 30

The part of the deficit that is not related to the state of the economy

Question 31

cyclical budget deficit

Answer 31

The part of the deficit that is reliant on the position of the economy

Question 32

Automatic fiscal stabilisers

Answer 32

changes in the size of the budget deficit as a result of the position of the economy

Question 33

Expansionary fiscal policy

Answer 33

Increasing spending and reducing taxation

Question 34

Deflationary fiscal policy

Answer 34

Reducing spending and increasing taxation

Question 35

Crowding out

Answer 35

Increased public sector spending causes a reduction in private sector investment

Question 36

Government objectives

Answer 36

Low unemployment Stable inflation (2%) Stable balance of payments Economic growth

Question 37

Crowding in

Answer 37

When higher government spending leads to an increase in private sector investment

Question 38

Gilts

Answer 38

Government bonds

Question 39

national debt

Answer 39

Government debt

Question 40

Laffer curve

Answer 40

A model which suggests that increasing tax too much will cause a decrease in tax revenue

Question 41

Keynesian AD/AS diagram

Answer 41

an AD/AS diagram where LRAS and SRAS are represented by a single curve

Question 42

central bank

Answer 42

A nations bank which produces money

Question 43

Quantitative easing

Answer 43

A process by which the central bank buys back government bonds to increase the supply of money

Question 44

The reserve requirement

Answer 44

what % of deposits banks must keep as cash

Question 45

The base rate

Answer 45

the interest rate that the central bank charges

Question 46

Liquidity trap

Answer 46

Where consumers hoard cash instead of spending it - even when interest rates are low

Question 47

Deflation

Answer 47

Negative inflation

Question 48

Disinflation

Answer 48

A fall in the rate of inflation

Question 49

Free markets SSP

Answer 49

Supply side policy aimed at increasing competitiveness and competition

Question 50

Interventionist policy

Answer 50

Government intervention to overcome market failure

Question 51

Privatisation

Answer 51

Selling state owned assets to the private sector

Question 52

Deregulation

Answer 52

Reducing barriers to entry to encourage new firms to join a market

Question 53

Reform of tax and benefit system

Answer 53

reducing the tax burden and making state benefits more efficient

Question 54

Competition policy

Answer 54

Ensuring that competition between businesses is fair

Question 55

Labour market flexibility

Answer 55

How easy it is for businesses to hire and fire workers

Question 56

tertiary sector of an economy

Answer 56

the services sector

Question 57

secondary sector of the economy

Answer 57

the sector that revolves around manufacturing

Question 58

primary sector of the economy

Answer 58

the sector that revolves around the extraction of raw resources