Macro

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