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Market
A place where buyers and sellers carry out an exchange
Competition
Buyers act independently; no one individual has market power (ability to control the price of production
Gross Domestic Product (GDP)
The market value of all final goods and services produced in a country over a time period
Gross National Income
The total income received by the residents of a country over a time period. The income of residents, regardless of their location, is considered
Nominal value
Money value or value measured in terms of prices that prevail at the time of measurement
Real value
Measure of value that takes into account changes in price over time
Real GDP/GNI
Nominal GDP/GNI adjusted to eliminate the influence of changes in prices.
GPD/GNI per capita
Dollar value of country’s GDP/GNI divided by the population
Price deflator
Shows how much change in GDP relies on change in price level
Purchasing Power Parities (PPPs)
Method of currency conversions that accounts for different price levels and therefore different purchasing powers across countries
National Income Statistics
Total market value of production in a country's economy during a year
Non-marketed output
transactions which occur without a payment being made in exchange for a good or service
Underground market
a market in which illegal goods and services are sold or legal goods and services are sold in an illegal way
parallel market
A market where buying and selling transactions are unrecorded, and are usually illegal.
poverty line
the estimated minimum level of income needed to secure the necessities of life
business cycle
Fluctuations in economic activity, such as employment and production
short-term fluctuations
Changes in business and economic activity that occur within the year.
Recession (depression)
Economic contraction of relatively short duration; where there is a falling real GDP and increasing unemployment of resources which last six months or more.
Long-term growth trend
In the business cycle diagram, refers to the line that runs through the business cycle curve representing average growth over long periods of time; shows how output grows over time when cyclical fluctuations are ironed out. The output represented by the long-term growth trend is known as potential output.
Potential output
The real output (GDP) an economy can produce when it fully employs its available resources
full employment
the level of employment reached when an economy produces at the max quantity of goods and services
Aggregate Demand
The total quantity of goods and services that all buyers in an economy want to buy over a particular time period, at different possible price levels
Interest rates
Interest expressed as a percentage; in the case of borrowed money, it is interest as a percentage of the amount borrowed. Change sin interest rates form the basis of monetary policy
consumer confidence
Measure of optimism of consumers about their future income and the future of the economy. Measured through surveys
wealth
The value of assets owned minus liabilities owed
Income taxes
Taxes paid by households on their incomes
Household indebtedness
How much households owe from borrowing in the past
Business confidence
Measure of optimism among firms in an economy about the future performance of firms and the economy. Measured through surveys
Business Taxes
Corporate income tax paid on firms' profits.
Corporate indebtedness
How much money firms owe from borrowing in the past
Exchange rates
The price of one’s country’s currency in terms of another country’s currency. As exchange rate ↑, value ↓
Aggregate Supply
Total amount of goods and services produced in economy over particular time period, at different price levels
Short-run aggregate supply
the total amount of goods and services produced in economy in the short run
Short-run
period of time when price of resources do not change together with changes in the price level
Long-run
period of time when price of resources do change together with changes in the price level
Long Run Aggregate Supply
Total amount of goods and services produced in economy in long run
Inflationary gap
When real GDP > potential GDP, and unemployment < natural rate of unemployment due to excess AD
Deflationary gap
When Real GDP < potential GDP, and unemployment > natural rate of unemployment due to insuffcient AD
natural rate of unemployment
Unemployment that occurs when economy is producing at its potential of full employment level of output
unemployment
People of working age who are actively looking for a job but are not employed
Unemployment rate
The number of unemployed people, expressed as a percentage of the labor force
Labour Market
the availability of employment and labour in terms of supply and demand
Labour Surplus
Labour performed in excess of the labour necessary to produce means of livelihood of worker
Labour shortage
Insufficient amount of people who can work
structural unemployment
Unemployment due to changes in demand for types of labour skills, geographical location of industries, or labour market rigidities
frictional unemployment
unemployment that occurs when people are in the process of moving jobs
seasonal unemployment
Demand for labour in certain industries changes on a seasonal basis because of variation in needs
cyclical unemployment
Unemployment over and above natural rate of unemployment and occurs during the downturn of the business cycle
Demand-deficient unemployment
Unemployment due to the lack of demand for goods and services in the economy
Inflation
A continuous increase in general price level
Deflation
A continuous decrease in general price level
Disinflation
A reduction in the rate of inflation
price index
Average of price for a given class of goods or services in a region at a time
Consumer price index
Measure of cost of living for typical household comparing basket of goods and services to base year
Demand pull inflation
Type of inflation caused by increase in AD
Cost Push inflation
Inflation caused by decrease in AS usually resulting from increases in cost of production
Hyperinflation
Price of goods and services increase uncontrollably over a period of time
Deferred Consumption
Occurs when consumers postpone spending such as if they expect the price level to fall
economic inequality
unequal distribution of income and opportunity between different groups in society
income inequality
The extent to which income is evenly distributed within a population
Wealth Inequality
the unequal distribution of assets within a population
Quintile
Dividing a group into fifths, a method often used to look at distribution of income
Lorenze Curve
A curve that graphs the cumulative percentage of income or wealth against the cumulative percentage of households used to show distribution within a population
Poverty
An inability to satisfy minimum consumption needs
absolute poverty
A situation where a person/family does not have enough income to meet basic human needs
relative poverty
A concept that compares the income of individuals or households in a society with median income
Minimum income standards
Identifies the amount of money different types of households require to achieve a socially acceptable standard of living.
Multidimensional poverty Index
A composite indicator that measures poverty in 3 dimensions: wealth, education, living standards
Opportunity
a set of circumstances that makes it possible to do something
inequality of opportunity
inequalities in potential outcomes in standards of living that arise from circumstances that are beyond one’s control
Globalization
economic integration on a global scale, involving increasing interconnectedness throughout the world
Pension
Regular payment made to person during retirement from investment fund that person or employer contributed during their working life
Poverty cycle
Arises when low income results in low savings, permitting only low investments in capital, and therefore low productivity of labour and income. The poverty is then passed on generationally. (example a person in poverty doesn’t have the money to go to college)
Direct taxes
Taxes paid directly to the governmentby the taxpayer, including personal income taxes, corporate income taxes, and wealth taxes.
Indirect taxes
Tax on spending on goods and services (tax collect from consumer by suppliers who remit to the government)
Proportional taxation
As income rises, tax rate remains the same
progressive taxation
As Income rises, tax rate rises
Regressive taxation
As income increases, tax rate also decreases
Universal Basic Income
financial support provided by a government in form of standard reoccurring payments to individuals without need for pre-qualification.