Econ 151 Terms

Gen-ed course at the University of Auckland.

Topic 9: Current Account Balance

Key component of a country’s balance of payments. Measures difference between a nation's savings and its investment.

Topic 9: Current Account Balance Key Components

Net Exports, Net Income from Abroad, Net Current Transfers

Topic 3: Cross price elasticity of demand

Exy = %change in QD of x/% change in price of y Complements negative, Substitutes positive

Topic 3: Normal Goods

YED > 0. Goods for which demand increases as consumer income rises.

Topic 3: Inferior Goods

YED < 0. Goods for which demand decreases as consumer income rises.

Topic 3:Necessities

0< YED <1. Demand rises with income, but less than proportionally.

Topic 3: Income Elasticity of Demand Formula

% change in quantity demanded / % change in income. It measures how sensitive the quantity demanded of a good is to changes in consumer income.

Topic 3: Luxuries

YED > 1. Demand rises more than proportionally with income.

Perfect competition SR profit can be caused by

temporary increases in demand or lower costs

NOT included in GDP calculations

illegal activities, unpaid work, transfer payments from government

Topic 9: Capital and Financial Account Balance

A record of a country's transactions involving the purchase and sale of financial assets and liabilities, including investments

Topic 10: Wealth Effect on Downward Sloping AD

Topic 10: Downward Sloping AD Theories

Wealth Effect, Interest Rate Effect, Exchange Rate Effect

Topic 10: Unemployment Rate

People who are actively seeking work / total number of people in labour force

Topic 10: Underutilisation

People could be working full time but are not OR working fewer hours even though they would like to work full time

Topic 10: Why zero unemployment is infeasible

Topic 9: Twin Deficit Hypothesis

Persistent government budget deficits will lead to higher real interest rates resulting in an appreciation of the country’s currency and trade deficit

Topic 9: Financial Investment Inflow/Outflow

FII/FIO,