macro compainion 1

These flashcards cover essential economic terms and their definitions from the lecture notes.

Supply-side policies

Policies designed to promote market forces to increase economic growth by shifting the production possibility frontier (PPF) outwards, aiming to increase productivity and competition.

Income

A flow of money measured over a period of time, typically expressed as £ per year.

Wealth

A stock of assets measured at a specific point in time.

Circular flow of income

The flow of goods and services between households and firms and their corresponding payments in money terms.

Aggregate Demand (AD)

The total of all spending in the economy at any given price level, calculated as AD=C+I+G+(X-M).

Consumption

The total spending by households on goods and services within the domestic economy over time, regardless of the production location.

Savings ratio

The measure of the amount of household disposable income that is saved, expressed as a percentage of total disposable income.

Wealth effect

The change in consumption patterns following a change in asset prices, such as house prices.

Investment

The spending by firms on new capital goods, contributing to the capital stock of the country.

Interest rate

The price of money, representing the cost to borrowers and the reward to savers.

Government spending

The expenditures made by central and local governments.

Net exports

The difference between the money earned from exports and the money spent on imports (X-M).

GDP

The total value of all output, goods and services produced in the economy over a period of time.

Economic growth

The increase in the value of the goods and services produced by an economy over a period of time, measured as a percentage rate of change in real GDP.

Recession

A fall in the value of goods and services produced by an economy over at least 6 months, indicated by a decrease in real GDP for two consecutive quarters.

Inflation

The rise in average prices in an economy over a year.

Disinflation

A fall in the rate of inflation, where prices are still rising but at a slower rate.

Deflation

The fall in average prices in an economy over a year.

Consumer Price Index (CPI)

A measure of the price level used to gauge inflation rates and assess changes in cost of living.

Unemployment

The number of working-age people who are out of work, looking for work within the last four weeks, and able to start work within the next two weeks.

Current account of the balance of payments

A record of a country's transactions in goods, services, investment income, and current transfers with the rest of the world.

Exchange rate

The value of one currency in terms of another currency.

Government budget

The difference between annual tax revenue and government spending.

National debt

The total stock of debt owed by the government, increasing with budget deficits.

Income inequality

The disparity in incomes between the highest and lowest income earners.

Environmental sustainability

Concerns regarding the protection and maintenance of environmental resources for future generations.

Fiscal policy

Government actions involving spending and taxation to influence total demand in the economy, categorized as a demand-side policy.

Monetary policy

The use of interest rate changes and money supply adjustments to influence the growth rate of total demand and price inflation, also a demand-side policy.