Macroeconomics

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Aggregate demand

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Total planned spending at a given price level. AD=C+I+G+(X-M)

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Aggregate supply

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Total output firms are willing and able to supply at a given price level.

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Appreciation of a currency

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Strengthening of a currency.

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Balance of payments

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A record of a country's financial dealings with the rest of the world.

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Balance of trade

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The difference in values between exports and imports of goods.

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Black (hidden or informal) economy

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Economic activity not declared for tax purposes.

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Budget (or fiscal) deficit

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When government revenue falls short of government spending.

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Budget (or fiscal) surplus

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When government revenue exceeds government spending.

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Business (or trade or economic) cycle

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Regular oscillations in economic activity.

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Capital (or capital stock)

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All inputs to production that have themselves been produced (e.g. tractors, spades, factories, and office buildings)

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Circular flow of income

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A model showing the flow of goods, services and factors and their payments around the economy.

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Consumer price index

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The official measure of inflation in the UK. It is the UK's name for the EU standard measure, tge Harmonised Index of Consumer Prices (HICP). CPI and RPIX exclude payments of mortgage interest and other housing costs.

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Cost push inflation

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Inflation caused by increases in firms' costs of production, e.g. wages, electricity, gas, diesel, and/or raw materials.

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Current account of the BOP

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The record of trade in goods and services, flows of investment income and transfers. (Investment income = interest on deposits, dividends from shares, etc.; transfers = remittances and intergovernment payments like EU budget contributions.)

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Current account deficit

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When outflows of money on the current/day-to-day BOP account exceed inflows.

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Current account surplus

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When inflows of money on the current/day-to-day BOP account exceed inflows.

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Deflation

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Sustained fall in the general price level.

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Deflationary policy

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Government policies which reduce aggregate demand.

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Demand-side policies; demand management

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Government use of fiscal or monetary policies to manipulate AD. (Execution of monetary policy outsourced to the Monetary Policy Committee.)

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Demand pull inflation

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Inflation caused by excess demand in the economy.

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Depreciation of a currency

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Weakening of a currency.

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Depression (or slump)

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A period in which there is a particularly deep and long fall in output.

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Direct tax

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Tax levied on income, wealth or profits.

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Discretionary fiscal policy

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Deliberate changes to fiscal policy to influence aggregate demand.

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Disposable income

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Household income minus income tax and National Insurance Contributions.

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Economic growth

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Growth in an economy's productive potential.

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Exchange rate

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The price of one currency in terms of another.

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Expansionary fiscal policy

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The use of tax and/or government spending to increase AD.

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Expenditure dampening (reducing) policy

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Government policies to reduce AD.

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Financial account of the BOP

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The section of the BOP recording flows of savings, investment and currency.

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Fine tuning

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The use of demand management policies to smooth out fluctuations in the economy.

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Fiscal stance

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Whether government is trying to raise or lower aggregate demand through fiscal policies.

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Fiscal policy

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Government policy towards taxation, government spending and borrowing.

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Frictional (search) unemployment

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When workers are unemployed for short lengths of time between jobs.

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Full capacity

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The output level at which no extra production can take place in the long run with existing resources.

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Gross domestic product (GDP)

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The value of output produced within an economy in a time period.

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Gross national income (GNP)

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The value of GDP plus income earned abroad (interest and dividends, etc.) Minus income flowing abroad.

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GDP growth

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Increase in the actual output of an economy.

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Hot money

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Money flowing between financial centres in search of the highest short-term interest rate.

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Human Development Index (HDI)

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A summary measure of the basic dimensions of human development in a country: a long and healthy life; access to knowledge; and a decent standard of living. Since 2010, the sources are: 1/3 life expectancy at birth; 1/3 mean and expected years of schooling; and 1/3 Gross National Income per head.

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Income

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The flow of wages or salary from a job or of interest and dividends.

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Indirect tax

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A tax on expenditure, e.g. VAT.

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Inflation

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A sustained rise in the general price level.

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Infrastructure

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Social overhead capital.

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Injection

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Spending on domestic output which is derived from outside the circular flow of income (i.e. Government expenditure; Investment; and eXports).

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Investment

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An increase in capital.

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Marginal propensity to consume

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The proportion of extra income that is spent.

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Marginal propensity to save

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The proportion of extra income that is not spent.

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Monetary policy

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Government policy towards monetary variables such as the interest rate, money supply and credit.

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Multiplier

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The ratio of a change in income resulting from a change in injection.

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National debt

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Outstanding public sector debt.

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Output gap

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The difference between the actual level of GDP and full employment output.

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Labour force, workforce or participation (activity) rate

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The proportion of working-age people in paid jobs or looking for them.

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Produvtivity

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Output per input of a factor of production.

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Public Sector Net Cash Requirement

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How much the government needs to borrow per time period.

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Quantitative easing

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A monetary policy where the central bank increases the money supply/base by a deliberate amount by buying government bonds from banks, funds and other financial institutions.

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Quality of life

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A measure of the overall well-being of a person.

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Standard of living

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A measure of the material well-being of a person.

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Recession

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Two successive quarters of negative economic growth.

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Supply side policies

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Government measures to increase aggregate supply.

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Supply-side shocks

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Factors which cause the AS curve to shift suddenly to the left, e.g. large and sudden increases in tge price of crude oil.

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Demand-deficient (cyclical) unemployment

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Unemployment caused by a fall in aggregate demand.

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Structural unemployment

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Unemployment that arises from changes in the pattern of demand and supply in the economy.

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Underemployment

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Where people who want full-time work are only able to find part-time employment.

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Unemployment

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The number of people who are actively looking for work, currently without a job.

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Unemployment rate

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The number of unemployed expressed as a percentage of the labour force.

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Wealth

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The value of a stock of assets owned at a point in time.

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Wealth effect

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The change in consumption following a change in wealth.

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Withdrawals (or leakages)

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Income which is not spent on domestic output. (I.e. T, S, M)