A-Level Econ Macro Defs

Front 1

Accelerator effect

Back 1

The relation between the change in new investment and the rate of change of of national income

Front 2

Balance of trade in goods and services

Back 2

Total value of exports of goods and services minus the total value of goods and services that are imported

Front 3

Boom

Back 3

A phase in the Economic cycle after a recovery, during which real GDP has increased to Unsustainable levels and unemployment is at a very low. level high or growing inflation is likely to be present

Front 4

Cost push inflation

Back 4

Where increased cost of production result in firms raising their prices leading to a rise in the price level. E.g. price of raw materials

Front 5

Demand-side shock

Back 5

Unexpected economic events that alter the demand conditions in an economy. Eg. Big changes in exchange rate, credit crunch , slump in housing market.

Front 6

Demand-side polices

Back 6

Polices that aim to influence the levels of one or more of the components of AD in an economy. They can be Fiscal polices or monetary polices.

Front 7

Economic cycle

Back 7

Fluctations in economic activity when economic growth fluctuates around the trend rate of economic growth

Front 8

Exchange rate

Back 8

It measures the price/ value of one currency in terms of another currency

Front 9

Household saving

Back 9

The part of a household income not consumed

Front 10

Interest rate

Back 10

The cost of borrowing or the reward of saving money expressed as a percentage.

Front 11

AD

Back 11

Total spending on all goods and services produced in the domestic economy during a given time period.

Front 12

AD formula

Back 12

C + I + G + (X-M)

Front 13

Bank rate or base rate

Back 13

The interest rate at which a Nation's Central Bank lends money to domestic Banks

Front 14

Budget deficit

Back 14

When government is spending more than it is receiving from taxes or other charges in the financial year.

Front 15

Deficit on the current account

Back 15

The current account of balance of payments records trade in goods and services, income flows ( investment or income) and current transfers. The account is in deficit when the value of imports are greater than the value of exports.

Front 16

Demand-pull inflation

Back 16

Persistant rise in prices resulting from increased availability of money. Can be caused by low interest rates, increased money supply, fiscal expansion or higher earnings

Front 17

Econmoic growth

Back 17

The annual percentage change / increase in real GDP. It represents a change / increase in output / real GDP / productive capacity of an economy. Usually measured quarterly or annually

Front 18

Fiscal policy

Back 18

The use of changes in the levels of taxation and government spending in order to influence AD and influence the level of economic activity

Front 19

Inflation

Back 19

A persistent rise in the general price level resulting in a fall in the purchasing power of money

Front 20

Investment

Back 20

An injection into the circular flow of income. Assets generating income, creating productive capacity, developing human capital. E.g. spending by firms on buildings, machinery and training

Front 21

Labour productivity

Back 21

Output per worker per period of time or output per person employed or total output divided by the number of people employed

Front 22

Multiplier effect

Back 22

Where an increase or decrease in spending leads to a larger than proportionate change in national income

Front 23

Positive output gap

Back 23

When actual GDP is above the economy's productive potential. Where the economy is working above its full capacity

Front 24

Productivity

Back 24

The percentage of output per man hour, in a specific time period.

Front 25

Real GDP

Back 25

The gross domestic product or output of an economy of the effects of inflation removed

Front 26

Recession

Back 26

A face of the economic cycle, after a boom, during which real GP starts to decrease and is neg for 2 or more consecutive quarters and unemployment begins to increase

Front 27

Savings

Back 27

Income minus consuption , the portion of income that is not spent

Front 28

Savings formula

Back 28

S= Y - C

Front 29

Slump

Back 29

A phase of the economic cycle, after recession / depression. It is defined by a more serious and prolonged recession during which the decrease in real GDP is 10% or higher and persistently negative. Unemployment is a significant problem.

Front 30

Supply - side polices

Back 30

Government policies designed to increase the productive capacity / potential output / underlying rate of growth of the economy. Eg spending on education and training.

Front 31

Trend rate of growth

Back 31

The rate at which the economy can grow without exerting either upward or downward pressure on inflation

Front 32

Monetary policy

Back 32

Policy involves changes in interest rates, the supply of Money & Credit and exchange rates to influence the economy.

Front 33

Negative output gap

Back 33

When actual GDP is below the economy's productive potential. Where the economy is working below its full capacity

Front 34

Productive capacity

Back 34

The amount of goods and services that the economy is capable of producing when all the available for factors of production are fully employed

Front 35

Productivity growth

Back 35

The increase in the percentage of output per man hour

Front 36

Real incomes

Back 36

Amount of money coming into a household over a period of time after the effects of inflation have been removed

or the monetary value of total output produced by the economy adjusted for inflation

Front 37

Recovery

Back 37

Phase of the economic cycle, after a recession / depression or slump, during which will GDP starts to increase and unemployment begins to fall

Front 38

Savings ratio

Back 38

Savings as a percentage of income

Or

total savings divided by total income

Front 39

Structural unemployment

Back 39

Unemployment that occurs when the demand for labour is less than the supply of labour in an individual labour market. May be caused by the decline in particular industry sector, region or occupation e.g. coal mining

Front 40

Supply side shock

Back 40

Unexpected economic event that would increase or reduce the cost of all firms in the economy e.g. a large increase in the price of oil

Front 41

Unemployment

Back 41

Those workers not currently employed but actively seeking work. Excludes full-time students. Measured by the claimant count or labour Force survey whose values are typically higher