Economics Grade 12 Practice Flashcards

Vocabulary-style flashcards based on the Mind the Gap Economics Grade 12 study guide, covering fundamental macroeconomic and microeconomic concepts.

Circular flow model

A macroeconomic model showing the continuous flow of spending, production, and income between different sectors of the economy.

Leakages (L)

Money withdrawn from the circular flow, such as through savings ($S$), taxes ($T$), and import expenditure ($M$), represented by the equation $L = S + T + M$.

Injections (J)

The introduction of additional money into the circular flow from investment ($I$), government spending ($G$), and payments for exports ($X$), represented by the equation $J = I + G + X$.

Gross Domestic Product (GDP)

The total value of all final goods and services produced within the borders of a country for a specific period.

Multiplier

A ratio which shows that an initial increase in spending will lead to a proportionately larger increase in national income, calculated using the formula $M = \frac{1}{1 - mpc}$ or $M = \frac{1}{mps}$.

Marginal propensity to consume (mpc)

The proportion of an increase in disposable income that a household spends on personal consumer spending.

Business cycle

Successive periods of growth (upswing) and decline (downswing) in economic activities, oscillating between a peak and a trough.

Recession

A period of negative economic growth for at least two successive quarters.

Exogenous explanation

The monetarist view that business cycles are caused by independent factors outside the economy, such as weather conditions, technological changes, or solar radiation.

Endogenous explanation

The Keynesian view that business cycles are caused by internal factors within the market economy, suggesting that markets are inherently unstable.

Leading indicators

Economic indicators that change direction before the economy does, such as job advertising space or building plans passed, helping to forecast future trends.

Fiscal policy

The use of government spending, taxation, and borrowing to influence the level of aggregate demand and economic activity.

Laffer Curve

A graph showing the relationship between tax rates and total tax revenue, illustrating that there is an optimal tax rate which maximizes revenue.

Public goods

Goods provided by the state for use by all members of society, characterized by non-rivalry and non-excludability, such as defense and street lighting.

Terms of trade

The ratio between the index of export prices and the index of import prices, calculated as $\frac{\text{Index of export prices}}{\text{Index of import prices}} \times 100$.

Balance of payments (BoP)

A systematic record of all economic transactions between the residents of a country and the rest of the world over a specified period.

Comparative advantage

A situation where one country has a relative advantage in producing a good or service at a lower opportunity cost than another country.

Perfect competition

A market structure with many buyers and sellers, homogenous products, perfect knowledge, and no barriers to entry or exit where sellers are price takers.

Monopoly

A market structure with only one seller of a unique product with no close substitutes and blocked entry, allowing the seller to be a price maker.

Oligopoly

A market structure dominated by a small number of large firms that are mutually dependent and often engage in non-price competition.

Externalities

Costs or benefits to third parties that are not included in the market price of a good or service, leading to a difference between private and social costs/benefits.

Consumer Price Index (CPI)

The official index used in South Africa to measure inflation by tracking changes in the cost of a fixed basket of consumer goods and services.

Repo rate

The key interest rate at which the South African Reserve Bank lends money to commercial banks.

Stagflation

An economic condition characterized by low growth, high unemployment, and a high inflation rate occurring simultaneously.

Sustainable development

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.