Economics key terms > Theme 2 > Flashcards

Theme 2 Flashcards

Theme 1 (69 cards)

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1
Q

Government Objectives

A

Trade balance
Inflation (low and stable)
Growth
Government budget
Employment
Redistribution of income (greater income equality)
Sustainable growth (protection of env.)

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2
Q

Trade balance

A

X-M

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3
Q

Inflation

A

A sustained increase in price level (CPI)

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4
Q

Inflation rate

A

% increase in PL

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5
Q

(LR) Economic growth

A

An increase in the productive potential of an economy

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6
Q

GDP

A

The total market value of all goods and services produced annually in an economy

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7
Q

GNP

A

The total value of is the value of products and services produced by a country’s FOP wherever those assets are located
(GDP+ net property income from abroad including dividends, interest and profit)

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8
Q

unemployment

A

Measures the number of people who willing, able and actively seeking work but are not in work

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9
Q

Circular flow of income

A

An economic model showing the flow of income (g/s, FOP) between households and firms within an economy

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10
Q

Multiplier effect

A

when an initial injection into the circular flow leads to a proportionately greater increase in aggregate demand and GDP

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11
Q

Recession

A

A fall in GDP for 2 consecutive economic quarters

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12
Q

Accelerator effect

A

When an increase in national output (GDP) results in a proportionately larger rise in capital investment spending because businesses are confident about the future and purchase capital goods to meet expected future demand–> this further increases AD cos investment and productive capacity of the economy increases

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13
Q

AD

A

Total planned spending in an economy over a period of time

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14
Q

Consumption

A

total planned spending by households on goods and services for their own private use

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15
Q

Investment

A

Firms spending on capital goods

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16
Q

Savings

A

the proportion of income not spent over a period of time

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17
Q

Disposable income

A

income left after tax deductions

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18
Q

discretionary expenditure

A

Voluntary spending on goods and services that people want, and savings towards items they aspire to buy.

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19
Q

essential expenditure

A

Spending on items required to live

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20
Q

Marginal propensity to consume

A

Proportion of an additional unit of income spent on C

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21
Q

Average propensity to consume

A

proportion of total income spent on consumption

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22
Q

fiscal policy

A

the deliberate adjustment of govt spending, borrowing or taxation in order to iinfluence AD/ economic activity

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23
Q

Protectionism

A

Any action a country takes to prevent trade in the form of a barrier

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24
Q

Aggregate Supply

A

total planned supply of goods and services in an economy in a given time period

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25
Short run
A period where at least one factor input is fixed
26
short run aggregate supply
Total planned output when prices can change but the productivity of factor inputs are kept constant
27
LR
where all FOP are variable
28
Full employment (of resources)
The maximum amount of output that an economy can produce sustainably using the FOP
29
Marginal propensity to withdraw(MPW)
proportion of an additional unit of income that is withdrawn from the circular flow (imports, savings, tax)
30
SR economic growth
where and economy utilises idle resources/spare capacity to increase production
31
GNI
Gross national income- measures the total income of a country's nationals GNI= GDP + net primary income from abroad Includes: wages, salaries, and investment income
32
Nominal GDP
GDP measured in current prices
33
Real GDP
GDP adjusted for inflation
34
Actual economic growth
Increase in real GDP
35
Potential/trend economic growth
Increase in productive capacity/potential of an economy
36
SOL
how well off an individual, household or economy is in terms of income, health, environment and political freedom
37
Unsustainable economic growth
when an increase in the productive potential of an economy today leads to a fall in the productive potential for future generations
38
PPP (Purchasing Power Parity)
A way of adjusting exchange rates to take into account different costs of living in different countries
39
Employed
Being in paid work for yourself or somebody else
40
underemployed
People who would prefer to work more hrs or full time but cannot OR are working in jobs that do not reflect their skill level
41
employment rate
pop. in work/ pop. of working age
42
unemployment rate
not in work but actively seeking/ labour force
43
big mac index
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.
44
globalisation
A process in which countries have become increasingly integrated and inter-dependent.
45
National happiness
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
46
Purchasing power
The buying power of a unit of currency. It is inversely related to the rate of iinflation
47
Redundancy
Making someone redundant is removing their paid employment
48
Negative equity
When the value of an asset falls below the debt left to pay on that asset. Term is most commonly used in connection with property prices after a slump in house prices
49
Precautionary savings
Savings because of fears of a loss of real income or rising unemp (acts as a buffer against economic shocks)
50
Capital accumulation
Where a country increases its capital stock( typically physical goods such as machinery) to increase economic growth by increasing productive capacity
51
net investment
gross investment - capital depreciation
52
Liquidity trap
A liquidity trap occurs when a period of very low interest rates and a high amount of cash balances held by households and businesses fails to stimulate aggregate demand.
53
Animal spirits
The level of confidence of business owners/ consumers > low levels canb lead to precautionary savings/ postdoning capital investment projects
54
Claimant Count
A measure of unemployment; the number of people receiving benefits for being unemployed
55
Cost push inflation
Inflation caused by a decrease in AS
56
Cyclical unemployment
Unemployment caused by a lack of AD
57
Good deflation
Occurs when increased supply results from productivity gains or technological advances.
58
Bad deflation
A sustained drop in prices caused by a collapse in AD triggering a "deflationary spiral" where consumers delay purchases, company profits shrink, wages are cut, and unemployment rises, potentially turning a recession into a deep economic depression, as seen in the 1930s.
59
Interventionist supply side policies
Policies designed to correct market failure, where the government intervenes in the market
60
Labour Force Survey
A measure of unemployment which surveys people to class them as unemployed, employed or inactive under the International Labour Organisation (ILO) definitions
61
Market-based supply-side policies
Policies which are designed to remove anything which prevents the free market system working efficiently
62
Monetary Policy Committee (MPC)
9 economists who meet monthly to set the Bank rate as well as other monetary instruments
63
Quantitative easing
When the central banks buys assets in exchange for money in an attempt to increase the money supply
64
Real wage unemployment
Unemployment caused when wages are set above the equilibrium wage rate (wages are 'sticky downwards')
65
Short run Phillips curve
Shows the relationship between unemployment and inflation: higher levels of unemployment lead to lower levels of inflation
66
Trade (business) cycle
The tendency of economic growth to rise and fall above and below the trend rate of economic growth, causing booms and busts
67
Underemployment
Those who are working part time, on zero hour contracts or on government training schemes but would prefer to be full time or those employed in areas under their skill level e.g. a graduate working at a bar
68
Unemployed
Those who are without work, able to start work in the next 2 weeks and have actively sought work for the last 4 weeks (ILO definition)
69
effective demand
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