Economics EOY

Grade 9 grrrr

Economic Growth

Economic Growth

Economic growth is the rise in the real GDP over a period of time

GDP

Gross domestic product is the total value of all goods and services produced within a country in a period of time

GDP per capita

Is the total output of a country over the number of people. Calculated by total output divided by population

Nominal GDP

The total value of output produced in a country in number terms

Real GDP

The total output of all goods and services produced within a country taking inflation into account

Price stability

Price stability is when the general price level stays constant over a period of time

General price level

The overall total prices of goods and services in an economy at a point in time

Inflation

Is the rise in the general price level for a sustained period of time

Disinflation

When there is a decrease in the rate of inflation over a period of time.

Rate of inflation

Rate of inflation is the change in the CPI index over the period of time

Deflation

When there is a decrease in the general price level in a period of time

Hyper inflation

Hyper inflation is when the rate of inflation is above 50%

Demand pull inflation

Demand pull inflation is when the aggregate demand for goods and services outstrip the productive capacity of the economy

Cost push inflation

Cost push inflation is when there is an increase in the cost of production, this could be an increase in wages ( labour cost), which causes the producer to push the higher costs onto the consumers by increasing the general price level of his goods and services. Can cause cyclical movement… inflation of goods cause workers to demand a higher wage hence how

Short term economic growth

Is when there is an increase in the output in a country, an increase in the total goods and services produced. This could be a result of an increase in aggregate demand which causes firms to output more and demand more workers… reduces unemployment and causes economic growth( short)

Long term economic growth

Is when there is an increase in the productive capacity of the economy. An increase in the education or training facilities which causes there to be more workers available for the LONG term

Employment

Employment is the use of labour in the economy to produce goods and services

Unemployment

Those in the working population who are able and willing to work but are unable to find work

Full employment

Is when the economy nears to its full capacity of labour to produce output. This can be bad if aggregate demand keeps rising then demand pull inflation will occur

Claimant count

It is a measure of unemployment according to the number of people opting for JSA and unemployment benefits. This is not very accurate as you don’t have to accept JSA or you might not be eligible

Labour force

Those aged between 16-64

Economically active

Those of working age that are willing and able to work

Economically inactive

Those of working age that are either unable or not willing to work

Level of unemployment

Refers to the number of people in the working population who are unemployed

Unemployment rate

Refers to the % of the countries workforce/working population that is unemployed. This is calculated by number of unemployed / working population or unemployed + employed * 100

Seasonal unemployment

When a person is unemployed caused by a fall in demand during a particular season. An example is a tourist hotel that is converted to a shopping centre during the winter.

Frictional unemployment

Unemployment where the person is in the time period where the are waiting to join their new job. Time lag between jobs which is necessary to match the right person to the right job. Short term

Structural unemployment

Unemployment where there is a permanent lack of demand for a whole industry. Like the coal factories in the North or they could move production overseas for cheaper factors of production so they can compete better.

Cyclical unemployment

Unemployment where there is a decline aggregate demand in the whole economy like a recession

Occupational mobility of labour

The ability to switch between jobs that have different skillset. Depends of their qualifications and training needed to be employed in that sector

Geographical mobility of labour

The ability or willingness for a worker to accept a job in a different region or country. This can depend on the transport facilities and cost of travel.

Fiscal policy

The use of gov spending and taxation to influence economic activity to achieve the 4 macroeconomic objectives

Gov spending

Main areas of Gov spending is social protection like benefits and JSA, education and healthcare these sum up to 60% of all gov expenditure

Gov taxation

Gov taxation main areas are income tax where people pay a portion of their income, VAT, National insurance where employee and employer pay 8%. Corporation tax which is a tax on firms profits. 2 types of tax direct and indirect

Direct taxes

Direct taxes are a tax on income e.g income tax or corporation tax. These taxes are progressive

Indirect taxes

Indirect taxes are a tax of spending e.g VAT which is a tax on the sale of most goods, or excise duty which is a tax on discouraged goods like tobacco. These taxes are regressive

Progressive taxes

Progressive taxes take a higher proportion of tax from high income earners and a smaller proportion of tax from low income earners. These taxes aim to reduce income through the redistribution of income, however some high income earners might move out of the country or find loopholes to pay a less proportion of tax this will mean the gov loses out on the tax all together.

Regressive taxes

Taxes that do not take income into account regardless of income. It causes a larger burden on low income earners as it is a higher proportion of their income

Monetary policy

The use of money supply and interest rates to influence the level of economic activity

Average tax rate

Average tax rate is calculated by the total tax paid / total income *100

Budget deficit

Refers to the difference between Gov expenditure and taxation revenue. Where gov spending is more than revenue. This means debt increases. Debt is a stock whereas deficit is a flow

Expansiory fiscal policy

Where there is a cut in taxes or a rise in Gov spending to try and stimulate an increase in agg demand and generate short run economic growth and meet macroeconomic objectives. Mainly during times of slow economic growth

Contractionary fiscal policy

Where there is a rise in taxes or a cut in Gov spending to try do decrease budget deficit and reduce inflationary pressures on the economy. During times of strong economic growth.