Level 2 Economics - Economic Growth, Inflation, and International Trade

Vocabulary flashcards covering key terms and definitions for macroeconomics topics including Economic Growth, Inflation, International Trade, and Exchange Rates.

Economic growth

An increase in the productive capacity of an economy, usually measured by an increase in real GDP over time.

Real GDP

The value of goods and services produced in an economy, adjusted for inflation.

GDP per capita

Real GDP divided by the population. It is useful for measuring changes in average material living standards.

Productive capacity

The maximum amount of goods and services an economy can produce using its available resources.

Inflation

A sustained increase in the general price level.

Deflation

A sustained decrease in the general price level.

CPI

The Consumer Price Index measures changes in the prices of a basket of goods and services purchased by households.

Purchasing power

The amount of goods and services that can be purchased with a given amount of money.

Demand-pull inflation

Inflation caused by aggregate demand increasing faster than the economy's productive capacity.

Cost-push inflation

Inflation caused by increases in firms' costs of production.

Exports

Goods and services produced domestically and sold overseas.

Imports

Goods and services produced overseas and purchased domestically.

Balance of trade

The difference between the value of exports and imports of goods.

Trade surplus

When the value of exports exceeds the value of imports.

Trade deficit

When the value of imports exceeds the value of exports.

Exchange rate

The price of one currency measured in another currency.

Comparative advantage

Occurs when a country can produce a good or service at a lower opportunity cost than another country.

Appreciation

An increase in the value of a currency relative to another currency.

Depreciation

A decrease in the value of a currency relative to another currency.

Productivity

The amount of output produced per unit of input.