Economics External Prep

Unit 4 Topic 1 vocab

Coincident Indicator

An indicator that provides information regarding changes in the economy at the same time as they occur in the economic cycle.

Example: Gross Domestic Product (GDP)

Consumer Price Index

A measure of the average change in the price of selected range (basket) of consumer goods and services.

Deflation

The sustained decrease in the general level of prices over a period of time, measured by a decrease in the consumer price index.

Headline Inflation

the percentage change in prices over time, as measured by the consumer price index; also as referred to as the consumer inflation rate.

Labour Force Underutilisation

An economy is not utilising its labour force to its full capacity.

Lagging Indicator

An indicator that provides information regarding changes in the economy after they occur in the economic cycle.

Examples: Unemployment rates, injury rates

Leading Indicator

An indicator that provides information regarding changes in the economy before they occur in the economic cycle.

Examples: new product development, employee training

Marginal Propensity to Consumer

The proportion of an increase in income that is spent on consumption

Marginal Propensity to Save

The proportion of an increase in income that is saved, rather than spent.

Nominal GDP

The value of final output of an economy’s goods and services expressed in current prevailing prices with no adjustment for the effects of inflation.

Non-accelerating Inflation rate of unemployment

-the natural unemployment rate

-the percentage of the labour force that is unemployed when the labour market is in equilibrium

-Includes frictional, structural and long-term unemployment

Paradox of thrift

Increased savings represent a diminishing circular flow of income; as everyone tries to save an increasingly larger portion of their incomes, the nation becomes poorer instead of richer.

Participation rate

the percentage oef the population over the age of 15 that is in the labour force

Price stability

a state of the economy in which there is little variation in prices; that is, there is low inflation

Real GDP

The value of final output of an economy’s goods and services adjusted for the effects of inflation

Stagflation

Situation in which inflation exists simultaneously with low levels of economic activity

The multiplier process

a more proportional change in the equilibrium level of national income resulting from a change in autonomous expenditure

Trend

the general movement over a time of statistically noticeable change

Underlying inflation

-the headline rate of inflation excluding one off or seasonal factors that cause short term volatility in the prices measures by the headline rate

-such as: changes in tax, fluctuation in petrol prices or banana prices after a cyclone

Unemployment Rate

the percentage of the labour force that is unemployed: 3.5-5.5