Studied by 1 person
Balance of payments definition?
A record of all financial transactions between an economy and the rest of the world
Current account definition?
The difference between money going in and out of an economy
Economic cycle definition?
Variations in the annual rate of growth of real gdp over time
Economic development definition?
Long run improvements in income, education and health or reductions in poverty and inequality
Economic growth definition?
An increase in the real value of goods and services produced, measured by annual % change in real gdp
Economic shocks definition?
Unpredictable events such as volatile global prices for oil.
Economic stability definition?
When growth, prices and unemployment don’t change much from one year to another
Price stability definition?
When there is an inflation rate of between 1-3% and price changes have little day-to-day impact on consumers and businesses
Trade-off definition?
When different policy objectives conflict
Unemployment rate definition?
The proportion of the economically active population who are unemployed
What is the Big Mac index?
A way of measuring purchasing power parity (ppp) by converting the average national Big Mac prices to US dollars
Claimant count definition?
A measure of unemployment, in which the number of people claiming Job Seekers Allowance (JSA) is counted
Constant prices definition?
Prices that have been inflation adjusted
How is the consumer price index (CPI) measured?
By the changes in the average cost of living for a representative household
What does CPIH include that CPI doesn’t?
Housing costs
Emerging markets definition?
describes the financial markets of developing countries
Full capacity output definition?
Level of GDP where all available factor inputs are fully employed
Globalisation definition?
A process where countries have become increasingly integrated and inter-dependent
GNI definition?
Income generated from resources owned by inhabitants and businesses of a country
Green gdp definition?
Environmentally adjusted gdp
gdp definition?
Total monetary value of output, spending and factor incomes within an economy over a given period of time
gdp per capita definition?
National income per person
Infrastructure definition?
Facilities essential for the efficient functioning of an economy e.g transport
Labour force survey definition?
A survey carried out quarterly where 44,000 households are phoned to ask if anyone in the household is unemployed but would be willing to start work within 2 weeks
Lagging indicators defintion?
Indicators which tend to follow economic cycles e.g unemployment
Leading indicators definition?
Indicators which predict future economic trends e.g consumer confidence
How is the baseline for the standard of living measured?
Reali income per capita measured at constant prices and adjusted for purchasing power parity (ppp)
In 2015 what % of total gdp did the uk manufacturing industry account for?
10%
Productivity definition?
Output per worker over a period of time
Purchasing power definition?
The buying power of a unit of currency. Inversely linked to inflation
Purchasing power parity (ppp) definition?
An economic theory that compares different countries currencies through a ‘basket of goods’ approach
Real disposable income definition?
Income after taxes and welfare benefits that’s adjusted for inflation
Retail price index (RPI) definition?
A measure of the change in the cost of a representative sample of retail goods and services. Not used since 2013
In 2015 what % of gdp did the service industries account for?
80%
Income definition?
A flow of earnings from using factors of production to generate an output of goods and services
Wealth definition?
The value of a stock of assets
Circular flow of income definition?
An economic model that shows flows of goods and services and factors of production between firms and households
Injections definition?
Variables in an economy that add to the circular flow
National income definition?
The level of income earned by all factors of production in an economy in a given time frame
Withdrawals definition?
Variables in an economy that remove money flows that the circular flow of income
Actual growth (short-run growth) definition?
A rise in real gdp in a given time period
Aggregate demand definition?
Total amount of goods and services demanded in the economy at a given time and price level
Aggregate supply definition?
Total planned output of goods and services in an economy at a given time and price level
Underlying rate (long-run) of economic growth definition?
Occurs when a country successfully raises their productive capacity allowing for a higher level of real gdp to be sustained
Exogenous (external) shock definition?
An unexpected event beyond the control of the country’s officials that has a large negative impact on the economy
What is access to credit?
The willingness and ability of financial institutions to lend funds to producers and consumers
What is the accelerator process?
Where planned capital investment is linked positively to the past and expected growth of consumer demand
Animal spirits definition?
The state of confidence or pessimism held by consumers and businesses
Consumer durables definition?
Products such as washing machines that aren’t used up immediately when consumed and which provide a flow of services over time
Consumer spending definition?
Household spending on goods and services
Disposable income definition?
Gross income without tax + NI contributions
Exchange rate definition?
The price of one country’s currency in relation to another
Fiscal policy definition?
A government’s policy regarding taxation and public spending
Government borrowing definition?
The amount the government must borrow each year to finance their spending
Government debt definition?
The total stock of unpaid debt issued by a government
Government spending definition?
Spending by the government on public services
Gross investment definition?
Total investment calculated by adding new investment to replacement investment
Household wealth definition?
The monetary value of assets
Interest rate definition?
An interest rate is the cost of borrowing and the reward for saving
Investment definition?
The purchase of capital goods or spending on human capital by firms
Investment income definition?
Interest, profit and dividends from assets owned and located overseas
Keynesian economics definition?
The belief that the state can directly stimulate demand in a stagnating economy
Negative equity definition?
When the value of an asset falls below the debt left to pay on that asset
Net investment definition?
Total investment minus replacement investment
Net primary income definition?
Part of the current account of the BoP, measures the net flow of profits, interest and dividends from investments in other countries + net remittance flows from migrant workers
Net secondary income definition?
Part of the current account of the BoP, includes overseas aid / debt relief, military grants and net payments to the EU
Net trade definition?
The balance between the monetary value of exports and imports
Pension fund definition?
Fund that pools employees pension benefits and holds them so they can be paid at retirement.
Personal allowance definition?
The amount of income you can earn before you start paying income tax
Precautionary saving definition?
Saving due to fears of a loss of real income or rising unemployment
Protectionism definition?
Restricting trade through tariffs and other forms of import controls e.g quotas
Replacement investment definition?
The purchase of capital goods by firms to replace existing, worn out capital. Doesn’t add to total capital stock of an economy
Saving definition?
Retaining part or all of income and putting it aside for future use
Saving ratio definition?
The percentage of household disposable income that is saved rather than spent
Trade cycle definition?
Fluctuations in economic activities
Unsecured credit definition?
Credit not secured by another asset e.g money borrowed on credit cards
Wealth effect definition?
The supposed link between changes in wealth and household spending
Marginal propensity to consume (MPC) definition?
The proportion of any change in income that is spent rather than saved
Marginal propensity to import (MPM) definition?
The change in total spending on imported products following a change in income
Marginal propensity to save (MPS) definition?
The change in total savings arising from a small change in household disposable income
Marginal propensity to tax (MPT) definition?
The change in tax after a change in income
Marginal propensity to withdraw (MPW) definition?
The sum of MPS + MPT + MPM
Multiplier definition?
A calculate of the degree to which injections into the circular flow causes changes in final national income
Multiplier process definition?
When an increase in investment initiates a further increase of another component of AD
Multiplier ratio formula?
1/1-MPC
Business tax definition?
The level of tax on businesses, including corporation tax and capital gains tax
Costs of production definition?
FoP prices e.g rent and wages
Money wage rates definition?
The going wage in an economy that businesses must pay to attract workers
Price level definition?
The general level of prices in an economy at a given point in time
What is the classical view of LRAS?
That it is inelastic
Factor mobility definition?
The extent to which factor inputs can easily switch between alternative uses with no loss of efficiency
Occupational immobility definition?
Barriers to moving easily between jobs
Geographical immobility definition?
Barriers to changing location to get a new job
For competitive markets to work efficiently economic agents must what?
Respond to price signals in the market
Institutional structure definition?
The structure of the institutes in an economy that upholds business law, provides funds through banking systems and protects workers
Keynesian LRAS definition?
Assumes wages and prices are fixed until near full employment is reached
Keynesian unemployment definition?
Unemployment caused by a lack of AD in an economy
LRAS definition?
Determined by the state of technology, productivity, factor mobility and incentives.
Actual growth definition?
A rise in real GDP in a given time period
Boom definition?
A period of rapid economic growth resulting in higher gdp
Note 
Flashcard (46)