Macro Vocab: Supply Side Policies and Economic Concepts

Supply side policies

Policies aimed at increasing aggregate supply (AS), a shift from left to right. They enhance the productive capacities of an economy while improving the quality and quantity of the four factors of production.

Pillars of supply side policy

Tax policy, regulatory policy, and monetary policy.

Privatisation

The transfer of assets from the public (government) sector to the private sector.

Market based supply side policies

Policies that aim to increase the growth of AS by placing a greater emphasis on market forces and competition.

Interventionist supply side policies

Policies that aim to increase the growth of AS by placing a greater emphasis on greater intervention by governments.

Infrastructure

Consists of any large scale capital used in the production of goods and services.

Human capital

Policies aimed at improving the quantity and or quality of labour through improvements in education and health.

Economically active population

Defined as a person who is actively seeking work and within the working age (18 - 65), not in full time education and declared physically fit to work.

Unemployment rate

The number of economically active people in the economy without paid employment.

Hidden unemployment

Includes individuals who have given up looking for work as they fear they have no chance of being successful.

Economic costs of unemployment

The gap between national output when the economy is in recession and the output level when the economy is at full employment.

Social costs of unemployment

Examples include a loss of income and fall in living standards impacting the unemployed worker's family and the individual.

Unemployment (out of work) payments

Payments made by some governments to the unemployed, which can negate some of the financial loss to the family when a person loses their job.

Inflation

A sustained increase in the general or average level of prices.

Deflation

A sustained decrease in the average level of prices (general price level) in an economy.

Disinflation

When the rate of inflation falls, prices are still rising but at a slower rate than before.

Demand pull inflation

The result of when rises in AD are greater than the country's ability to produce those goods and services.

Cost push inflation

The result of a rise in production costs.

Phillips curve

An economic concept stating that inflation and unemployment have a stable and inverse relationship.

Natural rate of unemployment

A combination of frictional and structural unemployment that persists in an efficient, expanding economy.

Wealth

The available assets that a person owns which may include property, stocks and shares, personal savings or easily tradable valuable items.

Income

The amount that an individual receives from various sources such as job, rent, interest, or profit.

Net income

A person's gross income minus taxes paid.

Equality

Fairness in providing each member of society with the same opportunities to be successful.

Equity

Recognises that each individual has different advantages and skills and allocates the required resources needed to reach an equal outcome.

Relative poverty

The condition in which people lack the minimum amount of income needed to maintain the average standard of living.

Lorenz curve

Illustrates the level of income inequality within an economy.

Gini coefficient

A formula that measures the level of income inequality within a society, ranging from 0 to 1.

Universal basic income

A governmental public programme for a periodic payment delivered to all on an individual basis without means test or work requirement.

Positive discrimination

The act of favouring someone based on a 'protected characteristic'.

Progressive taxation

A tax where the burden paid increases as a household's income rises.

Regressive taxation

A tax where the burden paid falls as a household's income rises.

Proportional taxes

Taxes where the burden falls equally on both low and high income households.

Transfer payments

Payments made by governments in the form of welfare benefits and public subsidies for which no money, goods, or services are received.

Economic growth

The growth of real output in an economy over time, measured by an increase in real GDP.

Actual growth

An increase in real output for an economy over time, measured as an increase in real GDP.

Potential growth

An increase in the potential output of an economy through an increase in the quantity/quality of resources.

Development / living standards

Improvements to the quality of life in a nation, measured by GNI per capita, literacy rates and life expectancy.

Structural unemployment

Long term unemployment caused by a fall in demand for a particular type of labor due to changes in the economy.

Green GDP

An index of economic growth minus the environmental consequences caused by that growth.