Macro speed definitions

GDP

Gross Domestic Product: quantity of goods and services produced in an economy - nominal

Real GDP

Value of GDP adjusted for inflation

Real GDP per Capita

value of real GDP divided by the population of the country

Consumer Price and Retail Price indexes

CPI/ RPI are measures of inflation

CPI measures household purchasing power with family expenditure survey.

RPI uses housing costs like council tax and mortgage interest

Unemployment

Those of working age, willing and able to work and actively seeking work but cannot find a job

Measures of UE

1) claimant count= jobseekers allowance and benefits

2) LFS: out of work for 4 weeks, willing and able to start in 2 weeks

Productivity

Output per worker per period of time

National Income

the total value of the goods and services a country produces

gross national income

the total value added in the production of goods and services in a country plus income received from abroad minus income paid abroad

gross national product

the total value added in the production of goods and services in a country plus net property income abroad in a year

aggregate demand

total spending on good and services by consumers

wealth effect

rise in price of houses make people feel wealthier, so they are likely to spend more

SRAS

the relationship between the total quantity of goods and services firms are willing to produce and the price level in the short run

long run

all factors of production are variable

lras

The time period when the costs of factors of production may vary. LRAS curve is assumed to be vertical. The maximum amount an economy can produce

disposable income

the amount of income consumers have left over after taxes

marginal propensity to consume

how much a consumer changes their spending following a change in income

marginal propensity to save

the proportion of each additional pound of household income that is used for saving

accelerator effect

a small change in national output can lead to a larger change in aggregate investment

protectionism

the act of guarding a country’s industries from foreign competition

multiplier effect

an initial increase in AD leads to an even bigger increase in national income

short run growth

the percentage increase in a country’s RGDP and is measured annually. Caused by increases in AD

long run economic growth

when the productive capacity of the economy is increasing and refers to trend rate of growth. caused by increases in AS

recession

negative economic growth over 2 consecutive quarters

economic shock

unexpected or unprecedented event that affects demand or supply

demand pull inflation

when AD increases, so it will increases SRAS due to higher price level.

cost push inflation

increasing the prices of products to push the costs onto consumers

labour derived demand

when demand increases labour demand for the product will increase

subsidy

policies done by government to aid industries and firms

inflation

A sustained increase in GPL and cost of living and a fall in the purchasing power of money

deflation

A sustained decrease in GPL and cost of living and a rise in the purchasing power of money

voluntary unemployment

there are jobs available but the individual is not willing to work at the current market wage rates

involuntary unemployment

when an individual is willing and able to work at current market wage rates but is unable to find employment

cyclical UE

demand deficient AD

Structural UE

long term UE that occurs because the skills/ location of the unemployed worker do not match jobs available

occupational and geographical immobility of labour

seasonal UE

when people are unemployed at particular times of the year like construction workers are more likely to be unemployed in the winter

Frictional UE

short term unemployment when people are between jobs

NRU

the rate of UE when the market labour is in equilibrium (structural and frictional RWUE)

real wage UE

when the real wages for workers in an economy are too high and above the equilibrium or market clearing wage rate. 

Disinflation

the falling rate of inflation

quantity theory of money

there is inflation if the money supply increases at a faster rate than national income

monetary policy

involves the central bank influencing the manipulation of interests rates, supply of money and credit and the exchange rate

fiscal policy

the manipulation of government spending, taxation and the budget balance

proportional tax

fixed rate for all tax payers regardless of income

progressive tax

increase in the average rate of tax as income increases

regressive tax

does not relate to income, but means those on the lowest incomes have a higher average rate of tax

globalisation

the process in which national economies have become increasingly integrated and inter dependent

free trade

trade between two countries without barriers and obstacles

protectionism

barriers to trade to protect domestic firms from foreign competition

tarrif

tax on imports

quota

quantity restriction

dumping

exporting goods to a country below cost

embargo

ban on imports

WTO

world trade organisation: regulates world trade

FDI

foreign direct investment: investment made from country to a business in another country

portfolio investment

purchase of variety of financial assets like stocks, bonds and mutual funds