Macro Chapter 1

Front 1

Macroeconomics

Back 1

Involves the study of the whole economy at the aggregate level

Front 2

Policy objective

Back 2

A target or goal that policy-makers aim to 'hit'

Front 3

Short-run economic growth

Back 3

Growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy.

Front 4

Long-run economic growth

Back 4

An increase in the economy's potential level of real output, and an outward shift of the economy's production possibility frontier.

Front 5

Gross Domestic Product (GDP)

Back 5

The sum of all goods and services, or level of output, produced in the economy over a period of time.

Front 6

Real GDP

Back 6

A measure of all the goods and services produced in an economy, adjusted for price changes or inflation.

Front 7

Nominal GDP

Back 7

GDP measured at the current market prices, without removing the effects of inflation.

Front 8

Recession

Back 8

A fall in real GDP for 6 months or more.

Front 9

Full employment

Back 9

According to Beveridge's definition, 3% or less of the labour force unemployed. According to the free-market definition, it is the level of employment occurring at the market-clearing real-wage rate, where the number of workers whom employers wish to hire equals the number of workers wanting to work.

Front 10

Claimant count

Back 10

The method of measuring unemployment according to those people who are claiming unemployment related benefits (Jobseeker's Allowance).

Front 11

Labour Force Survey

Back 11

A quarterly sample survey of households in the UK. The survey seeks information of respondents personal circumstances and their labour market status during a period of 1-4 weeks.

Front 12

Inflation

Back 12

A persistent or continuing rise in the average price level.

Front 13

Deflation

Back 13

A persistent or continuing fall in the average price level.

Front 14

Disinflation

Back 14

When the rate of inflation is falling, but still positive.

Front 15

Price index

Back 15

An index number showing the extent to which a price, or 'basket' of prices, has changed over a month, quarter or year, in comparison to the price(s) in a base year.

Front 16

Consumer prices index (CPI)

Back 16

The official measure used to calculate the rate of consumer price inflation in the UK. The CPI calculates the average price increase of a basket of 700 different consumer goods and services.

Front 17

Retail prices index (RPI)

Back 17

The RPI is an older measure used to calculate the rate of consumer price inflation in the UK. Currently, the UK government uses CPI for the indexation of state pensions and welfare benefits and for setting a monetary policy target, and the RPI for uprating each year the cost of TV and motor vehicles licences, together sometimes with taxes on goods such as alcoholic drinks.

Front 18

Indexation

Back 18

The automatic adjustment of items such as pensions and welfare benefits to changes in the price level, through the use of a price index.

Front 19

Balance of payments

Back 19

A record of all the currency flows into and out of a country in a particular time period.

Front 20

Current account of the balance of payments

Back 20

Measures all the currency flows into and out of a country in a particular time period in payment for exports and imports, together with income and transfer flows.

Front 21

Exports

Back 21

Domestically produced goods or services sold to residents of other countries.

Front 22

Imports

Back 22

Goods and services produced in other countries and sold to residents of this country.

Front 23

Balance of trade

Back 23

The difference between the money value of a country's imports and its exports. Balance of trade is the largest component of a country's balance of payments on current account.

Front 24

Balance of trade deficit

Back 24

The money value of a country's imports exceeds the money value of its exports.

Front 25

Balance of trade surplus

Back 25

The money value of a country's exports exceeds the money value of its imports.

Front 26

Balanced budget

Back 26

When government spending equals government revenue, which is mostly tax revenue.

Front 27

Budget deficit

Back 27

When government spending is greater than government revenue.

Front 28

Policy conflict

Back 28

Occurs when two policy objectives cannot both be achieved at the same time: the better the performance in achieving one objective, the worse the performance in achieving the other.

Front 29

Trade-off between policy objectives

Back 29

Although it may be impossible to achieve two desirable objectives at the same time, policy makers may be able to choose an acceptable combination lying between the extremes.

Front 30

Keynesian economists

Back 30

Followers of the economist John Maynard Keynes, who generally believe that governments should manage the economy, particularly through the use of fiscal policy.

Front 31

Pro-free market economists

Back 31

Opponents of Keynesian economists, who dislike government intervention in the economy and who much prefer the operation of free markets.

Front 32

Monetary policy

Back 32

The use by the government and its agent, the Bank of England, of interest rates and other monetary instruments to try to achieve the government's policy objectives.

Front 33

Fiscal policy

Back 33

The use by the government of government spending and taxation to try to achieve the government's policy objectives.

Front 34

Performance indicator

Back 34

Provides information for judging the success or failure of a particular type of government policy such as fiscal or monetary policy.

Front 35

Index number

Back 35

A number used in an index, such as the consumer prices index, to enable accurate comparisons over time to be made. The base year index number is typically 100.