Macro

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420 Terms

1
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Balance of payments definition?

A record of all financial transactions between an economy and the rest of the world

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Current account definition?

The difference between money going in and out of an economy

3
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Economic cycle definition?

Variations in the annual rate of growth of real gdp over time

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Economic development definition?

Long run improvements in income, education and health or reductions in poverty and inequality

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Economic growth definition?

An increase in the real value of goods and services produced, measured by annual % change in real gdp

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Economic shocks definition?

Unpredictable events such as volatile global prices for oil.

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Economic stability definition?

When growth, prices and unemployment don’t change much from one year to another

8
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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

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Trade-off definition?

When different policy objectives conflict

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Unemployment rate definition?

The proportion of the economically active population who are unemployed

11
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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

12
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Claimant count definition?

A measure of unemployment, in which the number of people claiming Job Seekers Allowance (JSA) is counted

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Constant prices definition?

Prices that have been inflation adjusted

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How is the consumer price index (CPI) measured?

By the changes in the average cost of living for a representative household

15
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What does CPIH include that CPI doesn’t?

Housing costs

16
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Emerging markets definition?

describes the financial markets of developing countries

17
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Full capacity output definition?

Level of GDP where all available factor inputs are fully employed

18
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Globalisation definition?

A process where countries have become increasingly integrated and inter-dependent

19
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GNI definition?

Income generated from resources owned by inhabitants and businesses of a country

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Green gdp definition?

Environmentally adjusted gdp

21
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gdp definition?

Total monetary value of output, spending and factor incomes within an economy over a given period of time

22
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gdp per capita definition?

National income per person

23
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Infrastructure definition?

Facilities essential for the efficient functioning of an economy e.g transport

24
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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

25
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Lagging indicators defintion?

Indicators which tend to follow economic cycles e.g unemployment

26
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Leading indicators definition?

Indicators which predict future economic trends e.g consumer confidence

27
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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)

28
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In 2015 what % of total gdp did the uk manufacturing industry account for?

10%

29
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Productivity definition?

Output per worker over a period of time

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Purchasing power definition?

The buying power of a unit of currency. Inversely linked to inflation

31
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Purchasing power parity (ppp) definition?

An economic theory that compares different countries currencies through a ‘basket of goods’ approach

32
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Real disposable income definition?

Income after taxes and welfare benefits that’s adjusted for inflation

33
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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

34
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In 2015 what % of gdp did the service industries account for?

80%

35
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Income definition?

A flow of earnings from using factors of production to generate an output of goods and services

36
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Wealth definition?

The value of a stock of assets

37
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Circular flow of income definition?

An economic model that shows flows of goods and services and factors of production between firms and households

38
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Injections definition?

Variables in an economy that add to the circular flow

39
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National income definition?

The level of income earned by all factors of production in an economy in a given time frame

40
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Withdrawals definition?

Variables in an economy that remove money flows that the circular flow of income

41
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Actual growth (short-run growth) definition?

A rise in real gdp in a given time period

42
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Aggregate demand definition?

Total amount of goods and services demanded in the economy at a given time and price level

43
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Aggregate supply definition?

Total planned output of goods and services in an economy at a given time and price level

44
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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

45
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Exogenous (external) shock definition?

An unexpected event beyond the control of the country’s officials that has a large negative impact on the economy

46
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What is access to credit?

The willingness and ability of financial institutions to lend funds to producers and consumers

47
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What is the accelerator process?

Where planned capital investment is linked positively to the past and expected growth of consumer demand

48
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Animal spirits definition?

The state of confidence or pessimism held by consumers and businesses

49
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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

50
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Consumer spending definition?

Household spending on goods and services

51
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Disposable income definition?

Gross income without tax + NI contributions

52
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Exchange rate definition?

The price of one country’s currency in relation to another

53
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Fiscal policy definition?

A government’s policy regarding taxation and public spending

54
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Government borrowing definition?

The amount the government must borrow each year to finance their spending

55
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Government debt definition?

The total stock of unpaid debt issued by a government

56
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Government spending definition?

Spending by the government on public services

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Gross investment definition?

Total investment calculated by adding new investment to replacement investment

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Household wealth definition?

The monetary value of assets

59
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Interest rate definition?

An interest rate is the cost of borrowing and the reward for saving

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Investment definition?

The purchase of capital goods or spending on human capital by firms

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Investment income definition?

Interest, profit and dividends from assets owned and located overseas

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Keynesian economics definition?

The belief that the state can directly stimulate demand in a stagnating economy

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Negative equity definition?

When the value of an asset falls below the debt left to pay on that asset

64
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Net investment definition?

Total investment minus replacement investment

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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

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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

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Net trade definition?

The balance between the monetary value of exports and imports

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Pension fund definition?

Fund that pools employees pension benefits and holds them so they can be paid at retirement.

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Personal allowance definition?

The amount of income you can earn before you start paying income tax

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Precautionary saving definition?

Saving due to fears of a loss of real income or rising unemployment

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Protectionism definition?

Restricting trade through tariffs and other forms of import controls e.g quotas

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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

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Saving definition?

Retaining part or all of income and putting it aside for future use

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Saving ratio definition?

The percentage of household disposable income that is saved rather than spent

75
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Trade cycle definition?

Fluctuations in economic activities

76
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Unsecured credit definition?

Credit not secured by another asset e.g money borrowed on credit cards

77
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Wealth effect definition?

The supposed link between changes in wealth and household spending

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Marginal propensity to consume (MPC) definition?

The proportion of any change in income that is spent rather than saved

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Marginal propensity to import (MPM) definition?

The change in total spending on imported products following a change in income

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Marginal propensity to save (MPS) definition?

The change in total savings arising from a small change in household disposable income

81
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Marginal propensity to tax (MPT) definition?

The change in tax after a change in income

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Marginal propensity to withdraw (MPW) definition?

The sum of MPS + MPT + MPM

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Multiplier definition?

A calculate of the degree to which injections into the circular flow causes changes in final national income

84
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Multiplier process definition?

When an increase in investment initiates a further increase of another component of AD

85
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Multiplier ratio formula?

1/1-MPC

86
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Business tax definition?

The level of tax on businesses, including corporation tax and capital gains tax

87
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Costs of production definition?

FoP prices e.g rent and wages

88
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Money wage rates definition?

The going wage in an economy that businesses must pay to attract workers

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Price level definition?

The general level of prices in an economy at a given point in time

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What is the classical view of LRAS?

That it is inelastic

91
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Factor mobility definition?

The extent to which factor inputs can easily switch between alternative uses with no loss of efficiency

92
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Occupational immobility definition?

Barriers to moving easily between jobs

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Geographical immobility definition?

Barriers to changing location to get a new job

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For competitive markets to work efficiently economic agents must what?

Respond to price signals in the market

95
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Institutional structure definition?

The structure of the institutes in an economy that upholds business law, provides funds through banking systems and protects workers

96
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Keynesian LRAS definition?

Assumes wages and prices are fixed until near full employment is reached

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Keynesian unemployment definition?

Unemployment caused by a lack of AD in an economy

98
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LRAS definition?

Determined by the state of technology, productivity, factor mobility and incentives.

99
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Actual growth definition?

A rise in real GDP in a given time period

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Boom definition?

A period of rapid economic growth resulting in higher gdp