economics vocabulary - macroeconomics

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Actual growth

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35 Terms

1

Actual growth

occurs when previous unemployed factors of production are put into use

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2

Circular Flow of Income

a simplified model of the economy which shows the economic flow of the economy

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3

Gross National Product (GNP)

the total money value of all final goods and services produced by an economy within a year, including net property from abroad

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4

Nominal GDP

the total money value of all final goods produced within an economy in a year, not adjusted for inflation

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5

Real GDP

the total money value of all final goods produced within an economy in a year, adjusted for inflation

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6

Per Capita GDP

the total money value of all final goods and services produced within an economy in a year per head

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7

How to calculate per capita GDP

= Real GDP / population

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8

Economic growth

the growth of real output in an economy over time, usually measured in real GDP per capita

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9

Economic Development

involving the improvement of the standard of living, reduction of poverty, and improved health and education

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10

Human Development Index

a composite index that brings together measurements of health, education, and living standards in order to attempt to measure relative development

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11

Aggregate Demand

the total spending in an economy by consumers at different prices

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12

Consumption

total spending by domestic households on goods and services

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13

Investment

the total spending of firms on capital equipment

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14

Government spending

the government’s expenditures on goods and services

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15

Net exports

total income earned from sales of exports to foreigners minus imports from other countries

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16

Inflationary Gap

the situation where total spending (AD) is less than the full employment level of output, thus causing inflation

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17

Deflationary Gap

the situation where total spending (AD) is more than the full employment level of output, thus causing unemployment

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18

Business Cycle

model showing the fluctuations in the level of economic activity in an economy over time

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19

Demand side policy

government policy designed to influence the aggregate demand in the economy, thus affecting average price level and real national output

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20

Fiscal Policy

a demand side policy using changes in government spending and/or direct taxation to achieve economic objectives relating to inflation and unemployment

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21

Monetary Policy

a demand side policy using changes in money supply or interest rates to achieve economic objectives relating to inflation and unemployment

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22

Aggregate Supply

the quantity of goods and services that a country’s producers are willing and able to produce at a range of price levels over a period of time

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23

Short run aggregate supply (SRAS)

aggregate supply that varies with the level of demand for goods and services that is shifted by changes in costs of factors of production

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24

Long run aggregate supply (LRAS)

aggregate supply that is dependent upon the resources in the economy and can only be increased by improvements in the quality/quantity of factors of production

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25

Supply side policy

government policies designed to shift LRAS to the right, thus increasing potential output in the economy

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26

Unemployment

people of working age actively looking for a job

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27

Labour force

percentage of people able to work

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28

Underemployment

people working part-time who want to work full time or qualifications are not being used at full potential

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29

Full employment

exists when the number of jobs available in an economy is equal to or greater than the number of people actively seeking work

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30

Unemployment rate

the number of unemployed workers expressed as a percentage of the labour force

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31

Structural Unemployment

equilibrium unemployment that exists when in the long-term the pattern of demand and production methods change and there is a permanent fall in the demand for a particular type of labour. There is a mismatch between skills and the jobs available.

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32

Frictional unemployment

equilibrium unemployment, that exists when people have left a job and are in the process of searching for another job

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33

Seasonal unemployment

equilibrium unemployment that exists when people are out of work because their usual job is out of season, e.g. a ski instructor in the summer

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34

Cyclical Unemployment

disequilibrium, when demand for all types of labour decreases and demand for nation’s goods and services decreases

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35

Natural rate of unemployment

combined experiences of frictional, seasonal and structural unemployment by an economy

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