3. Edexcel A-Level Economics theme 2 key terms

what does inactive mean

those neither employed nor unemployed; not participating in the job market

what is income

flow of assets

what is an index number

numbers allowing accurate comparisons over time to be made. the base year value is typically 100

what is an indirect tax

tax where the person charged with paying the money to the government, tax on consumption of demerit goods

what is inflation

the general rise in prices of goods and services that erodes the purchasing power of money

what is an injection

spending power entering the circular flow of income resulting in a change

what is interventionist supply side policy

policies designed to correct market failure, where the government intervenes in the market

what is investment

spending by business’s on capital goods, which leads to the creation of real

what is labour force survey

a measure of unemployment which surveys people to class them as unemployed, employed or inactive under the ILO definitions

what are living standards

the quality of life enjoyed by people in a country

what is long run

when all factors of production are variable

what is long run aggregate supply (LRAS)

the total output an economy can produce when operating at full output

what is long run trend growth rate

the average sustainable rate of economic growth over a period of time

what is marginal propensity to consume

the proportion of an increase in income spent on consumption

what’s the formula for marginal propensity to consume

change in consumption/change in income

what is marginal propensity to import

the proportion of an increase in income spent on imports

what are marginal propensity to save

the proportion of an increase in income that is saved

what is marginal propensity to tax

the proportion of an increase in income that is taken away in tax

what is marginal propensity to withdraw

the proportion of an increase in income that is withdrawn from the circular flow

what is market based supply side policies

policies which are designed to remove anything which prevents the free market system working efficiently