OCR Econ

Gross Domestic Product (GDP)

Total value of final goods and services produced within a country in a given period of time.

GDP per capita

Measures the total GDP of a country divided by its population.

Economic Growth

Change in a country's level of real GDP over time.

Rate of economic growth formula

Rate of growth of GDP = Change in GDP/Original GDP × 100.

Real GDP

Nominal GDP adjusted for inflation.

Short run economic growth

Growth in actual real GDP, usually arising from increases in aggregate spending.

Long run economic growth

Increase in the productive capacity of the economy, caused by increases in quantity and quality of factors of production.

Working age population

Those aged between 16 and 64.

Economically active (labour force)

Individuals of working age who are willing and able to work.

Economically inactive

Individuals of working age who are not able or willing to work.

Unemployed

The part of the labour force without paid work, available for work, and actively seeking employment.

Level of unemployment

Refers to the number of people in the working population or labour force who are unemployed.

Unemployment rate

Percentage of the working population or labour force who are unemployed.

Unemployment rate formula

Rate of unemployment (%) = Level of unemployment/Workforce × 100.

Cyclical unemployment

Caused by a lack of aggregate spending, often during economic downturns.

Structural unemployment

Caused by changes in the structure of the economy leading to decline in certain industries.

Frictional unemployment

Caused by short-term unemployment occurring when workers are between jobs.

Seasonal unemployment

Caused by seasonal variation in demand in certain industries or sectors.

Occupational mobility of labour

Willingness or ability of workers to move to jobs in different industries requiring different skills.

Geographical mobility of labour

Willingness or ability of workers to move to jobs in different regions.

Income

All payments received by individuals or households over time, such as wages and interest.

Wealth

Market value of total assets owned by an individual or household at a specific point in time.

Income distribution

Measures how total income of the economy is shared out among its people.

Income inequality

Uneven distribution of income between households.

Gross income

Income from all sources before any taxes are deducted.

Net income (disposable income)

Income after taxes and benefits are taken into account.

Absolute poverty

Severe deprivation of basic human needs, such as food and shelter.

Relative poverty

Measure of the percentage of the population living on less than 60% of median income.

Inflation

Sustained increase in the average price level over time.

Disinflation

A fall in the rate of inflation.

Deflation

Sustained decrease in the average price level of an economy over time.

Hyperinflation

A very high rate of inflation, often over 50%.

Price Stability

Means that the general price level stays fairly constant over time.

Rate of inflation

Percentage change in the average price level over a period of time.

Nominal value

Something's value in money terms.

Real value

Amount of goods and services that can be bought with a nominal amount.

Demand-pull inflation

Caused by increases in aggregate demand outstripping the productive capacity of the economy.

Cost-push inflation

Caused by an increase in the costs of production.

Fiscal Policy

Use of taxation and government spending to influence economic activity.

Budget Balance

Difference between government expenditure and tax revenue over a period of time.

Government (public) debt

Total amount of money owed by the government in a given period of time.

Direct tax

A tax on income and profits.

Indirect tax

A tax on spending.

Progressive tax

Takes a larger proportion of income from high earners than low earners.

Regressive tax

Takes the same amount from all taxpayers.

Monetary Policy

Manipulation of the money supply or interest rates to influence economic activity.

Expansionary monetary policy

Lowering interest rates or increasing the money supply.

Contractionary monetary policy

Increasing interest rates or reducing the money supply.

Supply-side Policies

Aim to increase the economy's productive capacity.

Market failure

When a free market leads to an equilibrium quantity above or below the socially efficient level.

Externality

A cost or benefit affecting a third party outside the economic activity.

Consumption externalities

External costs or benefits of consumption decisions, such as congestion from driving.

Production externalities

External costs or benefits of production decisions, such as pollution from factories.

Demerit Goods

Goods that would be over-produced in a free market due to information failure.

Merit Goods

Goods that would be under-produced in a free market due to information failure.

International Trade

The exchange of goods and services between countries.

Exports

Goods and services produced domestically and sold to foreigners.

Imports

Goods and services produced externally and bought from foreign countries.

Trade balance

Difference between the total value of exports and imports.

Absolute advantage

Ability to produce a product at lower average cost than another country.

Free Trade Agreement

Agreement allowing the free movement of goods and services between countries.

Balance of Payments

Record of all financial transactions between a country and the rest of the world.

Current Account

Records money flows between a country and the rest of the world due to trade and income.

Current Account Deficit

When outflows exceed inflows in the current account.

Current Account Surplus

When inflows exceed outflows in the current account.

Financial Account

Deals with financial assets that will provide future income flows.

Exchange Rates

The price of one currency in terms of another.

Depreciation

When the price of a currency decreases in terms of another.

Appreciation

When the price of a currency increases in terms of another.

Globalisation

Increasing integration of the world economy through trade and movement of labour and capital.

FDI (Foreign Direct Investment)

Firms purchasing physical capital in a foreign country.

MNC (Multinational Corporation)

Corporation operating in at least two countries.

Development

Process of increasing people's standard of living and wellbeing over time.

HDI (Human Development Index)

Measure of economic development based on life expectancy, education, and income.

Developed economy

An economy with high GDP per capita and well-developed sectors.

Less developed economy

An economy with lower GDP per capita and weaker wellbeing indicators.