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83 Cards in this Set
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ECONOMIC GROWTH |
The increase in the value of the goods and services produced by an economy over a period of time. It is measured as the % rate of increase in real GDP |
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NATIONAL INCOME |
The value of the output, expenditure or income of an economy over a period of time. Measured in UK by GDP |
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GROSS DOMESTIC PRODUCT (GDP) |
Total amount of goods and services produced in a country. Can also be the total amount spent or the total amount earned. Measured over a year or a quarter |
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NOMINAL GDP |
Output measured in current prices (not adjusted for inflation) |
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REAL GDP |
Output measured in current prices (IS adjusted for inflation) |
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TRANSFER PAYMENTS |
Not included in calculation of GDP as there is no corresponding output in the economy. Eg - pensions, social security, benefits, student grants |
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RECESSION |
Two consecutive quarters of negative change in GDP |
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STANDARD OF LIVING |
Measure of quality of life. Not just GDP. Can include happiness, hours of work, pollution, ownership of consumer durables |
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GDP PER CAPITA |
Total GDP divided by the number of people in the population. Useful for comparing between countries. |
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INFLATION |
A sustained rise in the general price level. Measured in the UK by changes in the CPI |
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CONSUMER PRICE INDEX (CPI) |
Measure of inflation preferred by government. Does not include housing costs eg - mortgage interest or rent |
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RETAIL PRICE INDEX (RPI) |
Measure of inflation which includes housing costs |
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INDEX NUMBER |
Useful in comparing changes over a time period. An index number is a number shown relative to the base year in percentage terms. The base year is given the number 100 |
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WEIGHTED INDEX |
CPI and RPI are weighted index numbers, based on the proportion of income spent by the average household on categories of goods and services. Weights are determined by the 'Expenditure and Food Survey', which samples 7,000 households per year |
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MEASUREMENT OF CPI / RPI |
Price survey each month on changes in price of a basket of 650 goods and services from a variety of retail outlets. |
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DEFLATION |
When the overall price level decreases so that the inflation rate becomes negative |
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COST PUSH INFLATION |
Rising costs cause businesses to raise prices. Examples include rising raw material costs, rising component costs, increased wage rates, higher indirect taxes. |
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DEMAND PULL INFLATION |
Excess demand in the economy leads to producers raising prices |
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DISINFLATION |
A reduction in the rate of inflation |
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EMPLOYMENT |
The number of people in work. As an equation: Number of people in work (%) _______________________________ X 100 Number of people who are economically active (%) |
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UNEMPLOYMENT |
Number of people looking for work but unable to find it As an equation:
Number of people out of work (%) ____________________________ X 100 Number of people who are
economically active (%)
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ECONOMICALLY ACTIVE |
People who are in work or who are willing to work. Also known as the workforce (includes unemployed people) |
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ECONOMICALLY INACTIVE |
People who are unwilling to work. Eg - People not of working age, students, unpaid carers, those unable to work |
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CYCLICAL UNEMPLOYMENT |
Lack of spending in the economy. Eg - Reduction in demand during a recession leads to unemployment |
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STRUCTURAL UNEMPLOYMENT |
Caused by changes in the structure of a country's economy. Eg - Decline of steel industry in the UK. Workers' skills become obsolete. |
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FRICTIONAL UNEMPLOYMENT |
When people are moving between jobs. Usually only lasts a short period of time |
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SEASONAL UNEMPLOYMENT |
Occurs when people are unemployed at certain times of the year, because they work in industries where they are not needed all year round.
Eg - Workers in construction, holiday and agricultural industries are less in demand in the winter. |
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CLAIMANT COUNT |
Measure of unemployment which records the number of people claiming Jobseeker's Allowance (JSA) |
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ILO MEASURE OF UNEMPLOYMENT (INTERNATIONAL LABOUR ORGANISATION) |
Labour Force Survey method based on a monthly survey of 6,000 households. It covers those who are between 16 and 65 who have been out of work for the last 4 weeks and are ready to start work within the next 2 weeks |
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BALANCE OF PAYMENTS |
The record of international payments over the course of a year |
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CURRENT ACCOUNT |
Records payments for transactions in the present year (other than investments and speculation). Comprises of trade in goods, trade in services, investment income and transfers |
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TRADE IN GOODS - Surplus or deficit in UK? - |
Includes manufactured goods, semi-finished goods, energy products, raw materials, consumer goods and capital goods. In the UK there is a constant deficit in the trade of goods account |
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TRADE IN SERVICES - Surplus or deficit in UK? - |
Includes banking , insurance and consultancy, tourism, shipping and transport, education, cultural arts eg - intangible services. In the UK there is traditionally a consistent surplus in the trade services account |
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TRANSFERS (BoP) |
Movements of wealth. Includes payments to the EU and foreign aid |
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INVESTMENT INCOME |
International flows of wages, interests, profits and dividends. It is the reward from investments, not the investment funds |
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CURRENT ACCOUNT DEFICIT |
More money is flowing out of the country than is flowing in on the current account. i.e. the value of imported goods and services exceeds the value of exported goods and services. The UK has a persistent current account deficit |
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CURRENT ACCOUNT SURPLUS |
More money is flowing into the country than is flowing out on the current account. i.e. the value of exported goods and services exceeds the value of imported goods and services. China has a significant current account surplus |
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HUMAN DEVELOPMENT INDEX (HDI) |
A composite measure of quality of life valuable for comparing living standards in different countries, published by the United Nations. Weighted: 1/3 education 1/3 health 1/3 GDP per capita at purchasing power parity |
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PURCHASING POWER PARITY |
It is determined by taking the relative cost of living and inflation rates in different countries into account and equalising their purchasing power to the point that the same basket of goods can be bought in the USA at the given rate of currency exchange |
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PERCENTAGE OF ADULT MALE LABOUR IN AGRICULTURE (varies how depending on development of a country?) |
As an economy develops workers tend to move out of the primary sector into the secondary and tertiary sectors |
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PRIMARY AND SECONDARY SCHOOL ENROLMENT FIGURES (implications of higher figures?) |
Implications for literacy and numeracy can make a significant difference to the future productive capacity of an economy |
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ACCESS TO CLEAN WATER (implications of more access?) |
The higher the levels of access to clean water, the greater the likelihood of increased life expectancies in the future |
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ENERGY CONSUMPTION PER CAPITA (varies how depending on development of a country?) |
Tends to increase as economies become more economically developed |
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ACCESS TO MOBILE PHONES PER THOUSAND OF THE POPULATION (varies how depending on development of a country?) |
Communication links are valuable for organisation of economic activity. Higher levels are generally seen in more developed countries. |
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WEALTH |
Measure of the value of all assets of wealth. An economy's assets are the factors of production available to it |
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INCOME |
The flow of cash or cash-equivalents received from work (wage or salary), capital (interest or profit), or land (rent) |
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NATIONAL INCOME |
Amount received by various agents in an economy - households, firms and government Same thing as GDP |
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CIRCULAR FLOW OF INCOME |
The flow of goods and services and factors of production between firms and households. Businesses produce goods and services and in a process of doing so, incomes are generated for factors of production. Eg - wages, sales, rent, interest and profit |
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LEAKAGES |
Withdrawals from the circular flow of income. Comprises of savings, tax and money spent on imports |
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INJECTIONS |
Input into the circular flow of income. Comprises of investment, government spending and income from exports |
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AGGREGATE DEMAND |
Total spending on goods and services in an economy over a given period of time. Calculated by: C + I + G + ( X - M ) |
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CONSUMPTION (C) |
Spending by households on goods and services. It's the main component of AD (about 65%) |
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INVESTMENT (I) |
The increase in capital stock. Eg - machinery and vehicles |
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Government spending (G) |
Spending on publicly provided goods and services. Includes spending on public sector employment |
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EXPORTS - IMPORTS (X - M) (Positive or negative figure in UK?) |
In the UK this is a negative figure. i.e - the outflow of money for foreign goods and services is greater than the inflow of money the UK receives from it's exports |
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AGGREGATE DEMAND CURVE (characteristics?) |
Downward sloping. Rise in price level will result in a fall in the total demand for goods and services |
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AGGREGATE SUPPLY |
The total amount that producers in an economy are willing and able to supply at a given price level, at a given time |
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AGGREGATE SUPPLY CURVE (SHORT RUN) (characteristics?) |
Slopes upwards from left to right. Higher prices increase the willingness and the ability of firms to supply more of the good or service |
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SUPPLY SIDE SHOCKS |
An unexpected event that changes the supply of a product, resulting in a sudden change in its price. It generally causes the SRAS curve to shift to the left, leading to higher inflation and lower output |
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CLASSICAL LONG RUN AGGREGATE SUPPLY CURVE |
Vertical curve which reflects the view that if there is spare capacity in an economy, it's not in equilibrium and eventually the spare capacity will disappear.
If markets are in equilibrium, there are no unemployed resources and it must be operating at full capacity |
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KEYNESIAN LONG RUN AGGREGATE SUPPLY CURVE |
Upwardly sloping, curving from elastic to inelastic where all resources become fully utilised. Reflects the view that the economy can be in equilibrium when there is spare capacity. In the long run unemployment may persist as wages don't always fall when unemployment occurs |
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SPARE CAPACITY |
Unemployed resources in the economy |
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MACROECONOMIC EQUILIBRIUM (occurs when?...) |
Macroeconomic equilibrium is achieved when aggregate supply is equal to aggregate demand (AS = AD).
Indicates what inflation and growth will be as AS or AD shift |
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MULTIPLIER EFFECT |
An increase in investment or any other autonomous will lead to an even greater increase in income |
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MULTIPLIER |
The figure used to multiply a change in investment or any other autonomous expenditure to find the final change of income. Eg - If the multiplier is 2 and there is an injection into the economy of £1 million then the total change of spending in the economy will be £2million |
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MARGINAL PROPENSITY TO CONSUME (MPC) ((be careful not to confuse with monetary policy committee - both can be written as MPC)) |
Measures the proportion of extra income (Y) that is spent on consumption (C), as opposed to saving it. It's calculated as the change in consumption divided by the change in income. The MPC will usually be between 0 and 1 Eg - If a person gains an extra £10, and spends £7.50, then the MPC will be £7.50/10 = 0.75. |
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AVERAGE PROPENSITY TO CONSUME (APC) |
The proportion of income a household devotes to consumption as opposed to saving it. Can be calculated as consumption divided by income |
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ACTUAL GROWTH |
Increase in real GDP |
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POTENTIAL GROWTH |
The amount by which a country could increase its production if all resources were used efficiently |
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SUSTAINABLE GROWTH |
Highest rates of growth which does not compromise the ability of an economy to grow in the future |
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OUTPUT GAP |
The difference between the actual level of GDP and the productive potential of the country |
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POSITIVE OUTPUT GAP |
When actual output is more than the full capacity output |
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NEGATIVE OUTPUT GAP |
When actual output is less than full capacity output |
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INFRASTRUCTURE |
Internal facilities of a country that make business activity possible. Eg - communication, transportation, distrubution networks, financial institutions and markets and energy supply systems |
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INCOME DISTRIBUTION |
Income distribution is how a nation's total GDP is distributed amongst its population. Modern economists are concerned with income equality and economic growth |
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ECONOMIC GROWTH (as a macroeconomic objective) |
Increase in incomes or potential output |
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EMERGING MARKETS |
Countries that are growing and industrialising very quickly |
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BRIC ECONOMIES |
Brazil, Russia, India, China Seen as the 'building bricks' for future global prosperity. Economic growth has slowed in these countries recently |
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TRENDS IN GROWTH |
Average rate of growth over a period of time |
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INFLATION TARGET UK |
UK target is 2% CPI rises within a range of tolerance of +/- 1% CPI rose by 0.6% in the year to August 2016 in the UK |
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MONETARY POLICY COMMITTEE (MPC) ((be careful not to confuse with marginal propensity to consume - both can be written as MPC)) |
Group of 9 Bank of England economists / industrialists / academic economists who have the task of achieving the inflation target. They meet monthly to set the base rate of interest, which is the tool used to control the level of inflation. The current interest rate is 0.25% (as of Aug 2016) |
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INTERNATIONAL COMPETITIVENESS |
The degree to which a country's good and services |
