Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

34 Cards in this Set

  • Front
  • Back
  • 3rd side (hint)


A rise in the general price level. A fall in purchasing power of money.


Price deflation is when the rate of inflation becomes negative so the general price level is falling but the value of money is increasing


Disinflation describes a fall in the rate of inflation whilst still positive means that prices are still rising just less quickly

Inflation rate

The percentage increase in the general price level usually measured as a yearly comparison

Inflation target

The UK inflation target is 2% according to the CPI measure of inflation


The Consumer Price Index is the official measure of inflation it's measures the price level of a representative basket of goods and services individual items are weighted and constructed into an index using a arithmetic mean. The CPI does not include housing costs within the index.

Menu costs

Menu costs are the costs to a girl resulting from changing prices required when inflation exists. The name stems from the cost of restaurants printing new menus but economists use it to refer to the costs of changing nominal prices in general.

Shoe leather costs

Refers to the cost of time and effort (opportunity cost) that people spend trying to counter act the effects of inflation such as holding less cash.

Opportunity costs

Cost push inflation

Cost push inflation is inflation caused by an increase in price of inputs for example the increasing cost of labour or raw materials a good example is the increasing price of oil

Demand pull inflation

Demand pull inflation is asserted to rise when AD outpaces AS. E.G could be caused by increased consumer confidence increasing consumer spending

Quantity theory of money

This theory proposes a positive relationship between changes in the money supply and the long term price of the goods. It states that increasing the amount of money in the economy will eventually lead to an equal percentage rise in the price of products and services.

Positive relationship

Price survey

The ONS survey the price of around 700 items each month. Many are measured in several places so 110,000 prices are collected in total from 20,000 shops in the UK. With another 70,000 prices measured online l. 703 items and services.


The Retail Price Index was previously the official measure of inflation and is measured using the broadly same approach as the CPI. The RPI includes a range of housing costs, and is constructed into an index using an arithmetic mean. The RPI is typically higher than the CPI.


An index is a series of numbers, with a base year usually represented by the number 100, which allows easy comparison of data against that base year.

Representative basket of goods and services

This is a relatively fixed set of around 700 consumer goods and services, the prices of which are tracked to measure inflation. The goods in the basket are adjusted annually to account for changes in consumer habits. Items in the basket are identified using the living costs and food survey.

Unemployment level

The number of people over the age of 16 that are without work, available for work and seeking work.

Unemployment rate

The unemployment rate is the proportionate or percentage of the economically active who are unemployed. It is important to note that economically active are those who are currently engaging in the labour market, that is the employed plus the unemployed.


This includes those workers that are highly skilled but working in lower paying jobs lower skill jobs and part time workers that would prefer to be full time.

Claimant count unemployment

The claimant count is the number of people who are reviving benefits principally for the reason of being unemployed.

ILO unemployment

This is the official measure of unemployment in the UK. It is used as a survey to ask about respondents personal circumstances and their activity in the labour market.

Structural unemployment

This is where workers have the wrong skills in the wrong place. It is associated with long-term decline in demand in an industry leading to fewer jobs as demand for labour falls away and occupational and geographic immobility of labour preventing workers finding other jobs straight away.

Frictional unemployment

Frictional unemployment is transitional unemployment due to people moving between jobs. Many people are unemployed for a short time whilst involved in job search.

Seasonal unemployment

Seasonal unemployment occurs when people are unemployed at certain times of the year. This can be because of increased supply of workers in the labour market at certain times of the year such as school leavers in July.

Cyclical unemployment

Cyclical unemployment is involuntary unemployment due to a lack of AD for goods and services. Also known as Keynesian unemployment. When there is a recession or a slow down in growth, we see rising unemployment because of plant closures, business failures and an increase in redundancies.

Job seekers allowance

Jobseekers allowance is the name of the UK's unemployment benefit. To be eligible claimants must be over 18 below state pension age not in full time education, be available for work and be actively seeking work and work less than 16 hours a week.

Balance of payments

A statement of all the financial transactions between the UK and the rest of the world.

Current account

A statement of the transactions relating to the balance of trade (goods and services) net income from abroad and net current transfers

Capital account

The capital account is a very small component of the balance of payments. It typically includes transfers that are one way flows. Such as gifts as opposed to commercial exchanges. For example debt forgiveness to LEDC

Financial account

The financial account include transfers of assets, not included within the capital account. This would include buying or selling of private sector assets held in other countries, foreign direct investment, global monetary flows related to investment in business, real estate, binds and stocks

Balance of trade

This forms a major component of the current account. The balance of trade measures net exports. It's is the value of exports - the value of imports.


Trade deficit

This is sometimes refered to as a trade gap. This is where the value of a countrys imports are greater than the exports. Tjis is the same as a negative figure of net exports

Trade surplus

This is where the value of a countries export of goods and service is greater than the imports. Same as a positive figure for net trade.

Overseas income

This is also sometimes refered to as investment income. It is money going in or out of a country as income from portfolio investments in the form of dividend or some other kind.

Current transfers

This is a component of the current account. These are transfers that occur between countries with nothing received in return. A good example is international aid.