Econ theme 2 definitions

Actual Growth

How much the economy has actually grown, measured by real GDP changes.

Aggregate Demand (AD)

The total demand for everything in the economy at a given time and price level.

Aggregate Supply (AS)

The total output produced in the economy at a given time and price level.

Animal Spirits

A fancy way to describe how confident business owners feel about the economy.

Balance of Payments

A record of all money flowing in and out of a country through trade and financial transactions.

Base Year

A starting year for comparing data, always given an index value of 100.

Boom

The high point in the business cycle when the economy is doing great!

Budget

The government's plan for how it will earn and spend money.

Budget Deficit

When the government spends more than it collects.

Budget Surplus

When the government collects more than it spends.

Circular Flow of Income

A model showing how money moves around the economy between households and businesses.

Claimant Count

A way to measure unemployment by counting people claiming unemployment benefits.

Consumer Price Index (CPI)

The official measure of inflation, tracking changes in the price of everyday goods.

Consumption

The amount households spend on goods and services.

Cost-Push Inflation

Inflation caused by rising production costs.

Current Account

Part of the balance of payments that records trade, income, and transfers.

Current Account Deficit

When a country spends more on foreign goods/services than it earns.

Current Account Surplus

When a country earns more from foreign trade than it spends.

Deflation

When prices of goods and services fall over time.

Deflationary Policy

Government policies aimed at reducing demand to control inflation.

Demand-Pull Inflation

Inflation caused by too much demand in the economy.

Depreciation

When assets like machinery lose value over time.

Direct Tax

A tax paid directly to the government, like income tax.

Disinflation

Prices are still rising, but at a slower rate than before.

Disposable Income

The money you have left after paying taxes and receiving benefits.

Economic Growth

When the economy produces more goods and services over time, measured by GDP.

Employed

Anyone working at least one hour per week for pay, or in unpaid work for their family business.

Expansionary Policy

Government actions to boost demand in the economy.

Exports

Goods and services sold to other countries.

Export-Led Growth

Economic growth driven by increased exports.

Fiscal Policy

Government decisions on spending, taxation, and borrowing to influence the economy.

Frictional Unemployment

Short-term joblessness when people are between jobs.

Gross Domestic Product (GDP)

The total value of all goods and services produced in a country.

GDP Per Capita

GDP divided by the population to show the average income per person.

Gross Investment

Spending on both replacing old equipment and buying new capital goods.

Gross National Income (GNI)

GDP plus income from abroad.

Gross National Product (GNP)

The value of all goods and services produced by a country's citizens, no matter where they are in the world.

Government Spending

Money spent by the government on public services and infrastructure.

Imports

Goods and services bought from other countries.

Inactive

People not working and not looking for work.

Index Number

A way to compare economic data over time using a base year of 100.

Indirect Tax

A tax added to goods/services (like VAT), paid by consumers indirectly.

Inflation

The general increase in prices over time, reducing the purchasing power of money.

Injection

Extra spending entering the economy from investment, government spending, or exports.

Labour Force Survey

A way to measure unemployment by surveying people about their job status.

Living Standards

The general well-being and quality of life of people in a country.

Long Run Aggregate Supply (LRAS)

The total output an economy can produce when all resources are fully used.

Long Run Trend Growth Rate

The average sustainable growth rate of an economy over time.

Monetary Policy

The central bank's control over interest rates and money supply to influence demand.

Multiplier Effect

When an increase in spending leads to a larger increase in national income.

National Income

The total income earned by people and businesses in an economy.

Net Exports

Exports minus imports.

Nominal GDP

GDP measured in current prices, without adjusting for inflation.

Output Gap

The difference between actual GDP and potential GDP.

Purchasing Power Parity (PPP)

A way to compare prices and the cost of living between different countries.

Quantitative Easing (QE)

When the central bank creates new money to buy financial assets and boost the economy.

Real GDP

GDP adjusted for inflation to show the true value of economic growth.

Recession

When the economy shrinks for at least two consecutive quarters.

Retail Price Index (RPI)

An old measure of inflation that includes housing costs.

Savings

Money that is not spent but kept for future use.

Seasonal Unemployment

Unemployment caused by seasonal work patterns (e.g., ski instructors in winter).

Short Run Aggregate Supply (SRAS)

The total output when some factors of production are fixed.

Supply-Side Policies

Government policies aimed at improving productivity and efficiency in the economy.

Trade Cycle (Business Cycle)

The natural rise and fall of economic growth, leading to booms and recessions.

Underemployment

When people are working part-time but want full-time jobs or are overqualified for their roles.

Unemployment

People who are jobless, able to work, and actively looking for jobs.

Wealth

The total value of all assets owned by an individual or society.

Withdrawal

Money leaving the circular flow of income due to savings, taxes, or imports.