11COM - Macroeconomics Vocab

production possibility curve

a curve that shows the maximum combination of two commodities that can be produced using all existing resources effienctly

circular flow model

an economic diagram that illustrates the interdependence that exists between the different sectors of the economy

interdependence

mutual reliance

real flows

movements of actual goods, services, and resources between different sectors of the economy

money flows

transfer of income, profit, spending or savings from one sector to another

injections

money put into the circular flow, increasing the level of economic activity

withdrawals/leakages

money taken out from the circular flow reducing the level of economic activity

household sector

a group of consumers living under the same roof who use goods and services

producer sector

the sector of the economy that creates/makes/provides goods and services and sells them in exchange for money

transfer payments

redistribution of income from governments to firms (eg subsidy) and households (welfare payments)

imports

goods made overseas but sold in new zealand

exports

goods made in new zealand but sold overseas

Aggregate demand

Total demand for goods and services in an economy at a given price level and time

Aggregate supply

Total supply of goods and services produced within an economy at a given price level withtin a certain period

Economic goal

a specific outcome that a government aims to achieve to improve the overall performance and wellbeing of the economy and its people

Gross Domestic Product (GDP)

Measures the final value of all final finished goods and services produced in an economy over a period of time (usually a year)

Inflation

An increase in the average price (general price level) of goods and services over a period of time

Consumer Price Index

measures the changing prices of goods and services a typical NZ household buys

deflation

a decrease in the general price level of goods and services in an economy (ie money gains purchasing power)

disinflation

a decrease in the rate of inflation, prices are still rising but at a slower rate

hyperinflation

prices of goods and services rise uncontrollably

nominal value

the money value in current year prices

real value

the money value after adjusting for inflation (reflects its true purchasing power)

voluntary unemployement

workers who are not willing to work at the current wage rate

Involuntary unemployment

workers who are willing to work at the current wage rate, but are unable to find a job

fiscal policy

government makes changes in taxation and/or government spending to influence economic activity

monetary policy

government makes changes to interest rates of money supply to influence economic activity