Economics Definitions Theme 2

Front 1

Inflation

Back 1

A rise in the general price level. A fall in purchasing power of money.

Front 2

Deflation

Back 2

Price deflation is when the rate of inflation becomes negative so the general price level is falling but the value of money is increasing

Front 3

Disinflation

Back 3

Disinflation describes a fall in the rate of inflation whilst still positive means that prices are still rising just less quickly

Front 4

Inflation rate

Back 4

The percentage increase in the general price level usually measured as a yearly comparison

Front 5

Inflation target

Back 5

The UK inflation target is 2% according to the CPI measure of inflation

Front 6

CPI

Back 6

The Consumer Price Index is the official measure of inflation it's measures the price level of a representative basket of goods and services individual items are weighted and constructed into an index using a arithmetic mean. The CPI does not include housing costs within the index.

Hint 6

Front 7

Menu costs

Back 7

Menu costs are the costs to a girl resulting from changing prices required when inflation exists. The name stems from the cost of restaurants printing new menus but economists use it to refer to the costs of changing nominal prices in general.

Front 8

Shoe leather costs

Back 8

Refers to the cost of time and effort (opportunity cost) that people spend trying to counter act the effects of inflation such as holding less cash.

Hint 8

Opportunity costs

Front 9

Cost push inflation

Back 9

Cost push inflation is inflation caused by an increase in price of inputs for example the increasing cost of labour or raw materials a good example is the increasing price of oil

Hint 9

Front 10

Demand pull inflation

Back 10

Demand pull inflation is asserted to rise when AD outpaces AS. E.G could be caused by increased consumer confidence increasing consumer spending

Hint 10

Front 11

Quantity theory of money

Back 11

This theory proposes a positive relationship between changes in the money supply and the long term price of the goods. It states that increasing the amount of money in the economy will eventually lead to an equal percentage rise in the price of products and services.

Hint 11

Positive relationship

Front 12

Price survey

Back 12

The ONS survey the price of around 700 items each month. Many are measured in several places so 110,000 prices are collected in total from 20,000 shops in the UK. With another 70,000 prices measured online l. 703 items and services.

Front 13

RPI

Back 13

The Retail Price Index was previously the official measure of inflation and is measured using the broadly same approach as the CPI. The RPI includes a range of housing costs, and is constructed into an index using an arithmetic mean. The RPI is typically higher than the CPI.

Hint 13

Front 14

Index

Back 14

An index is a series of numbers, with a base year usually represented by the number 100, which allows easy comparison of data against that base year.

Front 15

Representative basket of goods and services

Back 15

This is a relatively fixed set of around 700 consumer goods and services, the prices of which are tracked to measure inflation. The goods in the basket are adjusted annually to account for changes in consumer habits. Items in the basket are identified using the living costs and food survey.

Front 16

Unemployment level

Back 16

The number of people over the age of 16 that are without work, available for work and seeking work.

Front 17

Unemployment rate

Back 17

The unemployment rate is the proportionate or percentage of the economically active who are unemployed. It is important to note that economically active are those who are currently engaging in the labour market, that is the employed plus the unemployed.

Front 18

Under-employment

Back 18

This includes those workers that are highly skilled but working in lower paying jobs lower skill jobs and part time workers that would prefer to be full time.

Front 19

Claimant count unemployment

Back 19

The claimant count is the number of people who are reviving benefits principally for the reason of being unemployed.

Front 20

ILO unemployment

Back 20

This is the official measure of unemployment in the UK. It is used as a survey to ask about respondents personal circumstances and their activity in the labour market.

Front 21

Structural unemployment

Back 21

This is where workers have the wrong skills in the wrong place. It is associated with long-term decline in demand in an industry leading to fewer jobs as demand for labour falls away and occupational and geographic immobility of labour preventing workers finding other jobs straight away.

Front 22

Frictional unemployment

Back 22

Frictional unemployment is transitional unemployment due to people moving between jobs. Many people are unemployed for a short time whilst involved in job search.

Front 23

Seasonal unemployment

Back 23

Seasonal unemployment occurs when people are unemployed at certain times of the year. This can be because of increased supply of workers in the labour market at certain times of the year such as school leavers in July.

Front 24

Cyclical unemployment

Back 24

Cyclical unemployment is involuntary unemployment due to a lack of AD for goods and services. Also known as Keynesian unemployment. When there is a recession or a slow down in growth, we see rising unemployment because of plant closures, business failures and an increase in redundancies.

Front 25

Job seekers allowance

Back 25

Jobseekers allowance is the name of the UK's unemployment benefit. To be eligible claimants must be over 18 below state pension age not in full time education, be available for work and be actively seeking work and work less than 16 hours a week.

Front 26

Balance of payments

Back 26

A statement of all the financial transactions between the UK and the rest of the world.

Front 27

Current account

Back 27

A statement of the transactions relating to the balance of trade (goods and services) net income from abroad and net current transfers

Front 28

Capital account

Back 28

The capital account is a very small component of the balance of payments. It typically includes transfers that are one way flows. Such as gifts as opposed to commercial exchanges. For example debt forgiveness to LEDC

Front 29

Financial account

Back 29

The financial account include transfers of assets, not included within the capital account. This would include buying or selling of private sector assets held in other countries, foreign direct investment, global monetary flows related to investment in business, real estate, binds and stocks

Front 30

Balance of trade

Back 30

This forms a major component of the current account. The balance of trade measures net exports. It's is the value of exports - the value of imports.

Hint 30

(X-M)

Front 31

Trade deficit

Back 31

This is sometimes refered to as a trade gap. This is where the value of a countrys imports are greater than the exports. Tjis is the same as a negative figure of net exports

Front 32

Trade surplus

Back 32

This is where the value of a countries export of goods and service is greater than the imports. Same as a positive figure for net trade.

Front 33

Overseas income

Back 33

This is also sometimes refered to as investment income. It is money going in or out of a country as income from portfolio investments in the form of dividend or some other kind.

Front 34

Current transfers

Back 34

This is a component of the current account. These are transfers that occur between countries with nothing received in return. A good example is international aid.