Economics I - Definitions Test

real and nominal - index numbers - GDP and GNI and Growth - recession - factors of production

Nominal

values measured in current prices, without adjusting for inflation.

Real

values adjusted for inflation, reflecting purchasing power.

Nominal GDP

the total market value of all final goods and services produced in a country in a given year, measured using current prices without adjusting for inflation.

Real GDP

the total market value of all final goods and services produced in a country in a given year, measured using constant prices adjusted for inflation.

Real income

income values adjusted for inflation, representing actual purchasing power.

Index no.

represents the relative change in a variable or group of variables over time, often used to track inflation or economic growth.

Base year

the year chosen as a point of reference for comparing economic data, often used to calculate indices like GDP or inflation.

CPI

the Consumer Price Index, which measures the average change over time in the prices paid by consumers for a basket of goods and services.

GDP

Gross Domestic Product, a monetary measure that represents the market value of all final goods and services produced in a country during a specific time period.

GNI

Gross National Income – total income earned by a country's residents and businesses from domestic and international production/exports.

Inflation

Sustained increase in the general price level of goods and services, reducing currency purchasing power.

Deflation

Sustained decrease in the general price level of goods and services (opposite of inflation).

Disinflation

A reduction in the rate of inflation (prices are still rising, but more slowly)

Demand-pull inflation

Inflation caused by aggregate demand exceeding aggregate supply (too much money chasing too few goods)

Cost-push inflation

Inflation caused by an increase in the costs of production (such as raw materials or wages)

Percentage change

The change in percentage from the previous year to the current year.

% Change measured how?

(New−Old)/Old x 100

Economic Growth

An increase in the GDP of the economy.

Real GDP Per Capita

Real GDP divided by the total population.

Economic growth rate

The rate at which the GDP increases in the economy.

Living standards

The quality of life experienced by a person in the economy (closely tied to Real GDP per capita!)

Recession

A significant decline in economic activity lasting more than a few months, usually visible in real GDP, employment, and trade.

Negative economic growth

A period of decline in GDP; could result in a permanent recession or depression if left unaddressed.

Boom

A period of rapid economic growth and high consumer spending

Factors of production

CELL; The fundamental resources that power the economy.

Factors of production benefits

Wage, rent, interest, profit

Capital

man-made machinery, tools, and equiptments that aid in making products or conducting services

Enterprise

The entrepreneurship, innovation, and risk-taking required to run a business

Land

All natural resources and physical space used for production

Labour

The human workforce and employees that aid production

Division of labour

Splitting the production process into separate tasks where different workers perform individual steps.

Specialisation

Concentrating on a specific task or skill so a worker becomes highly proficient at it

Budget deficit

When the govt. spends more money than it receives

Labour force

No. of people employed in a country or looking for work.

Investment

Spending by businesses on capital goods, which leads to the creation of real goods

Exports

Goods/services sold to foreigners to bring income into the country.

Balance of Payments

Record of all financial dealings over a period of time between economic agents of one country and another.

Income tax

direct tax on income of individuals

unemployment

who are without work, able to start work in the next 2 weeks and have actively sought out work for the last 4 weeks

saving

decisions to postpone consumption

subsidy

an amount of money paid by government to a producer, so price charged to customer is lower