Economics Year 1 Macro

Front 1

Short run economic growth

Back 1

Growth of real output resulting from using idle resources including labour thereby taking up the slack in the economy

Front 2

Long run economic growth

Back 2

An increase in the economy's potential level of real output and the outwards shift of the economy's production possibility frontier

Front 3

Gross Domestic Product (GDP) (real)

Back 3

The sum of all goods and services or level of output produced in the economy over a period of time

(Adjusted for price changes or inflation)

Front 4

Recession

Back 4

A fall in real GDP for 6 months or more

Front 5

Full employment

Back 5

3% of less of the labour force unemployed

Front 6

Claimant count

Back 6

Method of measuring unemployment according to those who are claiming JSA

Front 7

Labour force survey

Back 7

A quarterly sample survey of households in the UK. To provide info in the UK labour market. 1-4 week period

Front 8

Inflation

Back 8

Persistent or continuing rise in the average price level

Front 9

Deflation

Back 9

A persistent or continuing fall in the average price level

Front 10

Disinflation

Back 10

When the rate of inflation is falling but still positive

Front 11

Price index

Back 11

An index number showing the event to which a price or a basket of prices has changed over a month, quarter or year in comparison with the prices in a base year

Front 12

Consumer price index (CPI)

Back 12

Official measure used to calculate the stage of consumer price inflation in the UK. The CPI calculates the average price increase of 700 different consumer goods and services

Front 13

Retail price index (RPI)

Back 13

Older measure used to calculate the rate of consumer price inflation in the UK.

Front 14

Indexation

Back 14

Automatic adjustment of items such as pensions and welfare benefits to change in the price level through the use of a price index

Front 15

Balance of payments

Back 15

A record of all the currency flows into and out of a country in a particular period of time

Front 16

Current account of the balance of payments

Back 16

Measures all the currency flows into and out of a counyth in a particular time period in payment for exports and imports together with income and transfer flows

Front 17

Exports

Back 17

Domestically produced goods or services sold to residents of other countries

Front 18

Imports

Back 18

Goods or services produced in another country and sold to residents of this country

Front 19

Balance of trade

Back 19

The difference between the money value of a country's imports and its exports. Balance of trade is the largest component of a country's balance of payments on current account

Front 20

Balance of trade deficit

Back 20

The money value of a country's imports exceeds the money value of its exports

Front 21

Balance of trade surplus

Back 21

The money value of a countrys exports exceeds the money value of its imports

Front 22

Balanced budget

Back 22

When govt spending equals govt revenue which is mostly tax rev

Front 23

Budget deficit

Back 23

When govt spending is greater than govt rev

Front 24

Policy conflict

Back 24

Occurs when two policy objectives cannot both be achieved at the same time. The better the performance in achieving one objective the worse the performance in achieving the other

Front 25

Trade off between policy objectives

Back 25

Although it may be impossible to achieve two desirable objectives at the same time, (0 inflation and full employment) policy makers may be able to choose an acceptable combination lying between the two extremes (2% inflationary 4% unemployment)

Front 26

Keynesian economists

Back 26

Followers of the economist John Maynard Keynes who generally believe that govt should manage the economy, partially through the use of fiscal policy

Front 27

Pro free market economists

Back 27

Opponents of Keynesian economists who dislike govt intervention in the economy and prefer the operation of free markets

Front 28

Monetary policy

Back 28

The use of the govt and its agent the Bank of England of interest rates and other monetary instruments to try to achieve the goverments policy objectives

Front 29

Fiscal Policy

Back 29

The use bu the govt of govt spending and taxation to try to achieve the govt policy objectives

Front 30

Performance indicators

Back 30

Provides information for judging the success or failure of a particular type of govt policy such as fiscal policy or monetary policy

Front 31

Index numbers

Back 31

A number used in an index such as the CPI to enable accurate comparisons over time to be made

Front 32

National Captial Stock

Back 32

The stock of capital goods such as the buildings and machinery in the economy that has accumulated over the and is measured at a point in time.

Front 33

Wealth

Back 33

The stock of assets which have value at a pint in time, distinct from income which is a flow generated over a period of time

Front 34

National wealth

Back 34

The stock of alm goods that exist at a point in time that have value in the economy

Front 35

National income = National output = national product

Back 35

The flow of new output produce by the economy in a particular period

Front 36

Consumption

Back 36

Total canned spending by households on consumer goods and services produced within the economy

Front 37

Closed economy

Back 37

An economy with no international trade

Front 38

Saving

Back 38

Income which is not spent

Front 39

Investment

Back 39

Total planned spending by firms on captial goods produced within the economy

Front 40

Withdrawal

Back 40

A leakage of spending power out of the circular flow of income into savings, taxation or imports

Front 41

Injections

Back 41

Spending entering the circular flow of income as a result of investment, govt spending and exports

Front 42

Open economy

Back 42

An economy open to international trade

Front 43

Reflatuonary policies

Back 43

Policies that increase aggregate demand with the intention of increasing real output and employment

Front 44

Inflation

Back 44

A continuing rise in the price level

Front 45

Aggregate demand

Back 45

The total planned spending on real output produce within the economy

Front 46

Equilibrium national income

Back 46

AD=AS or Withdrawals=injections

Front 47

Aggregate supply

Back 47

The level of real national output that producers are prepared to supply at different average price levels

Front 48

Economic shock

Back 48

An unexpected event hitting the economy. Demand or supply side, favourable or unfavourable

Front 49

Rate of interest

Back 49

The reward for lending savings to somebody else and the cost of borrowing

Front 50

Availability of credit

Back 50

Funds available for households and firms to borrow

Front 51

Credit crunch

Back 51

Occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to obtain financing and leads to a rise in the cost of borrowing

Front 52

Distribution of income

Back 52

The spread of different incomes amount individuals and different income groups in the economy

Front 53

Accelerator effect

Back 53

A chnage in the level of investment in new captial goods is induced by a change in the rate of growth of national income or aggregate demand

Front 54

Multiplier effect

Back 54

The relationship between a change in aggregate demand and the resulting usually larger change in national income

Front 55

Marginal propensity to consume

Back 55

The fraction of an increase in disposable income that people plan to spend on domestically produced goods

Front 56

Short run aggregate supply SRAS

Back 56

Aggregate supply when the level of capital is fixed through the utilisation of existing factors of production can be altered so as to change the level of real output

Front 57

Long run aggregate supply LRAS

Back 57

Aggregate supply when the economy is producing at its production potential. If more factors of production become available or productivity rises the LRAS curve shifts right

Front 58

Economic recovery

Back 58

When short tun economic growth takes place after a recession

Front 59

Trend growth rate

Back 59

The rate at which output can grow on sustained basis without putting upward or downward inflationary pressure. It reflects the annual average percentage increase in the productive capacity of the economy

Front 60

Economic cycle

Back 60

Upswing and downside in aggregate economic activity taking place over 4 to 12 years. Aka Business or trade cycle

Front 61

Actual output

Back 61

Level of real output produce in the economy not to be confused with the trend level of output. The trend level is what the economy is capable of producing when working at full capacity.

Front 62

Output gap

Back 62

The level of actual real output in the economy is greater or lower than the trend output level, positive vs negative

Front 63

Frictional unemployment

Back 63

Short term and occurs when worker switches between jobs. Aka trandisional unemployment

Front 64

Geographical immobility of labour

Back 64

When workers are unwilling or able to move from one area to another in search of work

Front 65

Occupational immobility of labour

Back 65

When workers are unwilling or unable to move from one type of job to another, for example because different skills are needed

Front 66

Structural unemployment

Back 66

Long term unemployment occurring when some industries are declining even though other industries may be growing. Automation reduces demand for labour.

Front 67

Deindustrialisation

Back 67

The decline of manufacturing industries together with coal mining

Front 68

Cyclical unemployment

Back 68

Lack of AD occurs when economy goes into a recession or depression. Aka Keynesian unemployment

Front 69

Seasonal unemployment

Back 69

Different seasons of the year, weather and a Christmas shopping period

Front 70

Real wage (unemployment)

Back 70

The purchasing power of the nominal wage ( stuck above the equilbirum)

Front 71

Voluntary vs involuntary unemployment

Back 71

Occurs when workers choose to remain unemployed and refuse offers at current wage rates.

Vs willing but not jobs available

Front 72

Equilibrium unemployment / natural rate of unemployment NRU

Back 72

Exists when the economy's aggregate labour market is in equilibrium. Same as the natural level of unemployment

Front 73

Demand pull inflation

Back 73

A rising price level caused by an increase in aggregate demand

Front 74

Cost push inflation

Back 74

A rising price level caused by an increase in the costs of production

SRAS left

Front 75

Wage cost inflation

Back 75

A rising price level caused by an increase in wages and salaries

SRAS left

Front 76

Import cost inflation

Back 76

A rising price level caused by an increase in the cost of imported energy, food, raw materials and manufactured goods shown by a shift of the SRAS to the left

Front 77

Monetarists

Back 77

Economist who argue that a prior increase in money supply is the cause of inflation

Front 78

Quantity theory of money

Back 78

Oldest theory of inflation which states that inflation is caused by a persistent increase in the supply of money

Front 79

Equation of exchange

Back 79

The stock of money in the economy multiplied by the velocity of circulation of money equals the price level multiplied by the quantity of real output in the economy

Front 80

Current account deficit

Back 80

Occurs when currency outflows in the current account exceed the currency inflows

SPICED

Front 81

Current account surplus

Back 81

Inflows in the current account exceed outflows

WPIDEC

Front 82

Balance of trade in goods (vs services)

Back 82

The part of the current account measuring payments for exports and imports of goods

Front 83

Net investment income

Back 83

The difference between inward and outward flows of investment income. Positive the UK is earning more income generate by the direct and portfolio invemests held abroad than it is paying to overseas owners of captial assets in the UK. Main component of primary income flows

Front 84

Transfers

Back 84

Payments flowing between countries in forms such as foreign aid, grants private transfers and gifts

Front 85

Export led growth

Back 85

Short tum economic growth resulting from the increase in exports as a component of AD. Long run would be increased international competitiveness of exporting industries

Front 86

Phillip's Curve short run

Back 86

Based on evidence from the economy showing the apparent relationship between rate if inflation and rate of unemployment.

Front 87

Phillips curve long run

Back 87

A vertical curve located at the natural rate of unemployment. Takes into account the role of expectations in the inflationary process

Front 88

Bank of England

Back 88

The central bank in the UK economy which is in charge of monetary policy

Front 89

Money

Back 89

An asset that can he used as a medium of exchange

Front 90

Inflation rate target

Back 90

The CPI inflation rate target set by the govt for bank of England to try and achieve. 2%

Front 91

Monetary Policy Committee (MPC)

Back 91

Nine economists chaired by governor of BOE who meet once a month to set Bank Rate, IR and decide on monetary policy stuff

Front 92

Bank rate

Back 92

The rate of interest the BOE pays to commercial banks on their deposits held at the BOE

Front 93

Liquidity

Back 93

Measures the ease with which assets can be tuned into cash quickly without a loss in value. Cash is most liquid of all assets

Front 94

Money supply

Back 94

The stock of money on the economy made up of cash and bank deposits

Front 95

Contractuonaru monetary policy

Back 95

Uses higher IR to decrease aggregate demand shift left

Front 96

Exchange rate

Back 96

The price of a currency

Front 97

Expansionary monetary policy

Back 97

Lowers IR to increase AD shift right

Front 98

Budget deficit, budget surplus, balanced budget

Back 98

Occurs when the govt spending exceeds govt revenue, vice versa, equals

Front 99

Demand side fiscal policy

Back 99

Change level of AD throughput changes in govt spending, taxation and budget balance

Front 100

Deficit financing

Back 100

Deliberately running a budget deficit and borrowing to finance the deficit

Front 101

Expansionary/ contraction fiscal policy

Back 101

Increase / decrease AD to shift right / left

Front 102

Discretionary fiscal policy

Back 102

Discrete changes to G and T and budget deficit to manage level of AD

Front 103

Crowding out

Back 103

Increase in govt spending displaces private sector spending with little or no increase in aggregate demand

Front 104

Sovereign debt problem

Back 104

Part of the national debt owned by people or institutions outside the country that has sold the debt to them. Stems from the difficulties govt face when trying to finance budget deficits by borrowing on international financial markets

Front 105

Supply side fiscal policy

Back 105

Increase the economist ability to produce and supply goods through creating incentives to work save and invest and be entrepreneurial. Interventionist supply side fiscal policies such as the financing of tethering schemes are also designed to improve supply side performance

Front 106

National debt

Back 106

The stock of all past central government borrowing that has not been paid back

Front 107

Cyclical budget deficit

Back 107

The part of the budget deficit which rises in the down swing of the economic cycle and falls in the upswing of the cycle

Front 108

Cyclical budget surplus

Back 108

If the structural deficit were zero a cyclical surplus would probably emerge in the upswing if the economic cycle

Front 109

Structural budget deficit

Back 109

The lart of the budget deficit which is not affected by the eocbonuc cycle but results from the structural change in the economy affecting the govt finances and also from long term govt policies

Front 110

Progressive taxation

Back 110

Income rises, a larger proportion of income is paid in tax

Front 111

Principle of taxation

Back 111

A criterion used for judging whether a tax is good or bad

Economy

Convenience

Certainty

Equity

Efficiency

Flexibility

Front 112

Regressive taxation

Back 112

Proportion of income paid in tax falls as income increases

Front 113

Proportional taxation

Back 113

When the proportion of income paid in tax stays the same as income rises

Front 114

Supply side policies

Back 114

Improve national economic performance by creating competitive and more efficient markets through interventionist policies

Front 115

Non interventionist supply side policies

Back 115

Free up markets promotion competition and greater efficiency and reduce the economic role of the state

Front 116

Privatisation

Back 116

Shifting ownership of state owned assets to the private sector

Front 117

Marketisation

Back 117

Shifting provision of goods or services from the money market sector to the market sector. Aka commercialisation