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General vocabulary and knowledge terms for IB Economics taught at a standard level
What is cost-push inflation?
Inflation caused by higher production costs.
What is demand-pull inflation?
Inflation caused by an excess of demand over supply.
Who controls monetary policy?
The central bank.
Who controls fiscal policy?
The government.
What is the goal of monetary policy?
To maintain healthy inflation, price level, liquidity, and economic growth.
What is the goal of fiscal policy?
To maintain government spending and promote a strong economy.
How can monetary policy be implemented?
Bank rates, reserve requirements, and open market operations.
What is supply?
The total amount of a good or service that is available to consumers.
What is demand?
A consumer’s willingness to purchase a good or service for any given price.
What is the bank rate?
The interest rate that a central bank institutes on loans to commercial banks.
What is the central bank?
The government institution that manages currency and monetary policy.
What is a reserve requirement/ratio?
The percentage of a commercial bank’s deposits that must be kept in liquidity.
What is a liquid asset or liquidity?
An asset that can easily be converted into cash.
What is an interest rate?
The price that is paid to borrow money.
What is currency?
An official form of money.
What is a consumer?
A person who purchases goods and services.
What is a producer?
A person who creates goods and services.
What is inflation?
A gradual increase in prices over time.
What is aggregate demand?
The total demand for all goods and services in an economy.
What is aggregate supply?
The total supply of all goods and services in an economy at a given price level during a certain period.
What is price level?
The average of current prices across purchased goods and services in an economy.
What is unemployment?
The rate that individuals search for work but cannot find it.
How is unemployment measured?
(unemployed / labor force) * 100.
What does microeconomics refer to?
The study of individual actors in an economy.
What does macroeconomics refer to?
The study of an economy as a whole.
What is the Gross Domestic Product (GDP)?
The total market value of all goods and services produced in an economy in a certain period.
How is GDP calculated?
Consumption + Investment + Government Spending + Net Exports.
What is the Consumer Price Index (CPI)?
The periodical change in prices paid by consumers.
How is CPI calculated?
By dividing the current market basket price by a previous base market basket price and multiplying the result by 100.
What is a market basket?
A collection of goods and services that mimic the purchases of an average consumer.
What is Price Elasticity of Demand (PED)?
The measurement of the change in demand for a good or service in relation to a change in price.
What is an elastic good?
One where a change in price leads to a proportionally larger change in demand.
What is an inelastic good?
One where a change in price leads to a proportionally smaller change in demand.
What is a Veblen Good?
A luxury good where demand increases as price increases.
What is a Giffen Good?
A non-luxury good where demand increases as price increases.
