EDEXCEL A-LEVEL ECONOMICS Theme 2 Glossary - VOCABULARY (Flashcards)

Vocabulary flashcards covering key terms from the Edexcel A-Level Economics Theme 2 glossary (The UK Economy: Performance and Policies).

Big Mac index

A PPP measure: compares currencies by the price of a Big Mac to assess whether a currency is under or overvalued.

PPP (Purchasing Power Parity)

An economic theory that compares currencies by pricing a basket of goods similarly across countries.

BRICS economies

Brazil, Russia, India, China and South Africa; rising emerging markets with a growing share of world trade.

Constant prices

Data adjusted for inflation to reflect real values rather than price level changes.

Economic cycle

Fluctuations in real GDP growth over time (boom, recession, etc.).

Economic development

Long-run improvements in income per capita, education, health and reductions in poverty.

Economic growth

An increase in the real value of goods and services produced, as shown by real GDP growth.

Economic shocks

Unpredictable events (e.g., oil price spikes) that disrupt economies.

Economic stability

A situation where growth, prices and unemployment are relatively steady year to year.

Emerging markets

Developing economies with growing financial markets and potential for rapid growth.

Full capacity output

GDP when all available factors of production are fully employed.

Globalisation

Process of increased international integration and interdependence.

GNI (Gross National Income)

Income generated by a country's residents and businesses from domestic and overseas sources.

Green GDP

GDP adjusted for environmental costs and sustainability considerations.

GDP (Gross Domestic Product)

Total monetary value of all final goods and services produced within a country.

GDP per capita

GDP divided by population; used as a measure of living standards.

HDI (Human Development Index)

Index measuring development by literacy, life expectancy and real income per capita.

Infrastructure

Essential physical systems (transport, energy, communications) that support an economy.

Lagging indicators

Economic indicators that follow the cycle (e.g., unemployment).

Leading indicators

Indicators that predict future economic trends (e.g., consumer confidence).

Macroeconomic performance

Overall economic performance across output, prices, employment, etc.

Manufacturing

One of the production sectors, includes mining, electricity, and industry production.

National happiness

Societal wellbeing measures beyond GDP (health, relationships, etc.).

National income

Total income earned by all factors of production in a period.

Nominal GDP

GDP measured at current prices, not adjusted for inflation.

Nominal income

Income measured in current money values, not adjusted for inflation.

Per capita incomes

Income per person; average living standards.

Purchasing power

Buying power of a unit of currency; inversely related to inflation.

Real GDP

Nominal GDP adjusted for price changes (inflation/deflation).

Real income

Income adjusted for price changes (inflation).

Real income per capita

Real national income per head of population (real GDP per capita).

Service industries

The service sector, including retail, finance, public services, etc.

Inflation

A sustained rise in the general price level of goods and services.

CPI (Consumer Price Index)

UK government's preferred measure of inflation; weighted price index.

Cost-push inflation

Inflation caused by rising production costs.

CPIH

A CPI measure that includes owners’ housing costs.

Creeping inflation

Small, persistent rises in the general price level.

Deflation

A persistent fall in the general price level.

Demand-pull inflation

Inflation caused by AD exceeding AS (too much money chasing too few goods).

Disinflation

A fall in the rate of inflation (not a deflation).

Inflation expectations

What people expect inflation to be; can influence spending and wages.

Inflation target

The rate that the central bank aims to achieve (e.g., 2%).

Inflationary pressures

Demand-side and supply-side factors that push up prices.

Money supply

The total amount of money in circulation in an economy.

Price stability

Low and stable inflation, typically around 1–3%.

Relative deflation

Inflation rates lower than those of comparable economies.

Stagflation

A combination of slow growth and high inflation.

Wage-price spiral

Wages rise, leading to higher costs and further inflation.

Weights (CPI)

Relative importance of categories in price indices based on spending patterns.

Claimant Count

Number of people claiming unemployment-related benefits.

Cyclical unemployment

Unemployment caused by a deficient demand for goods and services.

Demand-deficient unemployment

Another term for cyclical unemployment.

Discouraged workers

People out of work who stop seeking employment; part of hidden unemployment.

Disguised unemployment

Hidden unemployment where workers are underutilised.

Economically active

All people employed or actively seeking work.

Economically inactive

People of working age not in work and not seeking work.

Frictional unemployment

Short-term unemployment as people move between jobs.

Full employment

Situation where there are enough job vacancies for all seeking work.

Human capital

Skills, knowledge, and health that enable workers to produce value.

ILO (International Labour Organization)

UN agency promoting decent work and international labor standards.

Job search

Process by which workers find suitable employment.

Labour Force Survey (LFS)

Official UK study of employment and unemployment; large sample.

Migration

Movement of people between countries; includes immigration and emigration.

Natural rate of unemployment

Equilibrium rate: frictional + structural unemployment.

NEETs

Not in Education, Employment or Training; 16–24 age group.

Net inward migration

Inflows of migrants exceed outflows.

Real wage

Nominal wage adjusted for inflation.

Redundancy

Ending employment due to job elimination or restructuring.

Seasonal unemployment

Unemployment linked to seasonal demand fluctuation.

Structural unemployment

Unemployment due to long-term industry decline or skills mismatch.

Tight labour market

High demand for labour with shortages of suitable workers.

Under-employment

Workers willing to work more hours than offered.

Unemployment rate

Proportion of the economically active population unemployed.

Unemployment trap

Benefit withdrawal barrier that disincentivises accepting work.

Unit wage costs

Labour costs per unit of output.

Zero Hours Contract

Contract with no guaranteed hours; pay only for hours worked.

Balance of payments

Record of all financial transactions between an economy and the rest of the world.

Balance of trade

Exports minus imports of goods and services.

Capital account

Part of the balance of payments covering capital transfers and patents/assets.

Current account

Difference between money in and out: trade, income, transfers.

Current account deficit

Deficit when outflows exceed inflows.

Current account surplus

Surplus when inflows exceed outflows.

Cyclical trade deficit

Trade deficit arising from business cycle variations.

Euro

European single currency used by 19 EU countries.

Exchange rate

Price of one currency in terms of another.

External competitiveness

Ability to sell goods abroad at competitive prices.

Net primary income

Profits, interest and dividends from overseas investments.

Net secondary income

Overseas aid, debt relief, and similar transfers.

Net trade

Exports minus imports in value terms.

Overseas assets

Assets owned abroad (e.g., stocks, property) that generate income.

Protectionism

Tariffs and other controls to limit imports and protect domestic industries.

Remittances

Money sent by migrants to people in their country of origin.

Structural trade deficit

Deficit due to structural weaknesses in competitiveness.

Trade deficit

Imports exceed exports; net withdrawal from circular flow.

Aggregate Demand (AD)

Total planned spending on goods and services in an economy.

Animal spirits

Consumer/firm confidence influencing spending and investment.

Consumption

Household spending on goods and services (C in AD=C+I+G+NX).

Consumer confidence

Expectations about the economy influencing spending decisions.

Consumer durables

Goods not used immediately; provide services over time.

Disposable income

Income after taxes and transfers available for spending.