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89 Cards in this Set
- Front
- Back
Recession
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Negative economic growth over two successive quarters.
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Economic Growth
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An increase in the real output of the economy.
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Long-term Growth Rate
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The average rate of economic growth sustained over a period of time.
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Real Gross Domestic Product (GDP) Per Capita
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The total output of the economy in a year, divided by the size of the population, adjusted for inflation.
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Actual Growth
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An increase in the productive potential of the economy matched by an increase in demand.
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Potential Growth
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An increase in the productive potential of the economy not necessarily matched by demand.
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Output Gap
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The difference between the actual level of GDP and the productive potential of the economy.
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Trend Rate of Economic Growth
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The long-run average increase in GDP.
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Supply-side Policies
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A range of measures designed to increase aggregate supply.
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Activity rate/Participation rate
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The proportion of the population of working age in a job or actively seeking work.
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Occupational Immobility
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The difficulties faced by workers wishing to change occupations due to not having the required skills or qualifications.
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Labour Productivity
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Output per worker per hour.
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Gross Domestic Product (GDP)
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Output produced by resources within the UK.
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Gross national product (GNP)
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Output produced by resources within the UK, plus net property income from abroad.
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National Income
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Output produced by resources within the UK, plus net property income from abroad, minus depreciation of the nation's capital equipment.
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Non-monetised Sector
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Valuable economic activity where no money changes hands.
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Purchasing Power Parity
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Exchange rates that take into account how much a typical basket of goods in one country costs compared to another country.
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Human Development Index (HDI)
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A measure of economic welfare based on the average of three indicators- standard of living, life expectancy and educational attainment.
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Human Poverty Index (HPI):
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A measure of economic welfare based on four basic dimensions of human life: longevity, knowledge, Economic provisioning, and social inclusion.
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Measure of Domestic Progress
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A measure of economic welfare designed to reflect progress in quality of life and progress towards a sustainable economy by factoring in the social and environmental costs of growth, and benefits of unpaid work such as household labour.
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Misery Index
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A measure of economic welfare constructed by adding the unemployment rate to the inflation rate.
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Sustainability (of economic growth)
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Economic growth which does not impose costs on the future generations.
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Balance of payments
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A record of the financial transactions over a period of time between a country and its trading partners.
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Inventory Investment/Stock-Building
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Investment by firms in stocks of raw materials and stocks of finished goods ready to be sold.
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Demand-Pull Inflation
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Inflation resulting from too much demand in the economy, relative to the supply capacity.
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Accelerator Theory
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The theory that the level of investment is related to past changes in national income.
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Multiplier Effect
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A change in one of the components of AD leads to a greater overall change in national income.
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Multiplier/accelerator model
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A model which describes how the interaction of the accelerator theory & the multiplier effect lead to changes in national income.
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Direct taxes
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Taxes levied directly on the income of an individual or organisation.
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Canons of taxation*
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The characteristics of a 'good tax', after Adam Smith.
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Principles of taxation
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A modern list of characteristics of a 'good tax' system.
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Horizontal equity
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When people or firms with the same income and financial circumstances pay the same amount of tax.
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Vertical equity
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When the amount that people and firms pay is based on their ability to pay.
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Hypothecation*
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When taxes are earmarked for a specific purpose.
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Benefit principle*
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The argument that taxes should be linked to the benefits received by taxpayers.
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Progressive tax
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Where the proportion of a person's income paid in tax increases as income increases.
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Regressive tax
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Where the proportion paid in tax falls as income increases.
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Proportional tax
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Where the proportion of income paid in tax stays the same as income increases.
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Capital expenditure
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Government spending to improve the productive capacity of the nation, for example on schools.
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Current expenditure
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Government spending on the day-to-day running of the public sector, including raw materials and wages of public sector workers.
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Transfer payments
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Government payments to individuals for which no service is given in return, for example state benefits.
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Fiscal stance
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Whether the government is seeking to increase or decrease AD through fiscal policy.
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Cyclical budget deficit
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A budget deficit resulting from fluctuations in the economic cycle
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Automatic stabilisers*
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Features of government spending and taxation that minimise fluctuations in the economic cycle.
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Structural budget deficit
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A budget deficit resulting from fundamental changes in the structure of the economy.
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PSNCR*
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Public Sector Net Cash Requirement - The difference between government spending and revenue.
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National debt
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Borrowings of government over successive years.
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Crowding out
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Where a public sector deficit deters private sector investment and consumption.
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Golden rule*
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The UK government's fiscal rule that net government borrowing should only be to fund infrastructure projects.
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Sustainable investment rule*
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The fiscal rule that over the economic cycle, public sector debt should not exceed 40% of GDP.
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Stealth' taxes
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A negative term coined by government critics to describe taxes designed to go unnoticed.
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Foreign direct investment (FDI)
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Investments in the domestic economy in new manufacturing plants by foreign multinational companies.
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Discretionary/active fiscal policy
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Deliberate changes in government spending or taxation to influence the economy as a whole.
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Laffer curve*
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A model that shows the theoretical relationship between tax rates and tax revenues.
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Current account
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The part of the balance of payments that primarily records trade in goods and services.
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Capital account and financial account
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The part of the balance of payment that records capital flows in and out of the country.
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Current account deficit
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When imports of goods and services exceed exports.
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Current account surplus
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When exports of goods and services exceed imports.
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Balance of trade in goods
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Visible exports minus visible imports.
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Balance of trade in services
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Invisible exports minus invisible imports.
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Net income flows
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The difference between inward and outward flows of interest, profits and dividends.
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Net current transfers
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Mainly government transfers to and from overseas organisations.
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Hot money
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Volatile capital movements which take place in the foreign exchange markets due to interest rate changes.
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Direct investment
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The acquisition of productive assets, for example, factories and offices.
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Portfolio investment
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The acquisition of financial assets, for example, shares and financial derivatives.
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Expenditure-reducing policies
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Policies used to correct current account imbalances by reducing consumer spending power.
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Expenditure-switching policies
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Policies used to correct current account imbalances by encouraging consumers to buy domestically produced output rather than imports.
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Marginal propensity to import
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The proportion of an increase in income that is spent on imports.
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Devaluation
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Controls on imports, such as tariffs and quotas.
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Direct controls
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Reducing the value of a currency in a fixed or semi-fixed exchange rate system.
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Depreciation
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In relation to currencies, reducing the value of a currency in a free-floating exchange rate system.
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J-curve effect
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In the short term, a devaluation or depreciation will lead to a deterioration of the current account before it starts to improve.
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Revaluation
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Increasing the value of a currency in a fixed or semi-fixed exchange rate system.
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Appreciation
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Increasing the value of a currency in a free-floating exchange rate system.
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Exchange controls
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restrictions on the ability to trade foreign currencies by a county's central bank
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Adjustable peg
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value of the fixed exchange rate can be changed as circumstances require
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Crawling peg
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frequent changes in the value of a fixed exchange rate
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international monetary fund
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a multinational institution set up in 1947 to operate the adjustable peg exchange rate system
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Ceiling and floor price
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maximum and minimum price determined by the authorities respectively
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dirty float
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manipulation of a floating rate to gain advantages over trading partners
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Single market
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removal of obstacles, such as customs checking, to allow the free movement of goods, services, capital and persons through the area
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European monetary union
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a group of countries that have adopted the euro and have their monetary policy controlled by the European central bank
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Trade deflection
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redirection of international trade due to the formation of a trade area
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Rules of origin
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stipulation that a product must be manufactured from locally sourced components
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Intra-trade area
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trade between the members of a trading agreement
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Trade creation
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an increase in international trade that results from the reduction in trade barriers
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Social dumping
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where goods are produced by low wage labour usually with expense by employers on workers' social benefit
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Anglo-saxon neo-liberalism
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economic reform aimed at boosting the dynamism of economies - in contrast to the social model, which stresses social objectives
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Eurosclerosis
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high unemployment and slow job creation despite economic growth
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