NCEA Level 2 Economics - Growth, Trade & Inflation Vocabulary

Comprehensive vocabulary definitions covering key economic concepts from NCEA Level 2 Economics, including Economic Growth (AS 91224), International Trade (AS 91223), and Inflation (AS 91222).

Economic Growth

An increase in a country's real Gross Domestic Product (real GDP) over time.

Gross Domestic Product (GDP)

The total value of final goods and services produced within a country during a period of time.

Real GDP

The value of output measured after removing the effect of changes in the price level, used to measure economic growth.

GDP Per Capita

Real GDP divided by the population ($\text{GDP per capita} = \frac{\text{Real GDP}}{\text{Population}}$), showing the average amount of economic output per person.

Expansion

An economic state that occurs when real GDP increases.

Recession

A period when economic activity falls significantly, involving falling real GDP and usually lower employment and income.

Economic Development

An improvement in people's overall quality of life, including health, education and living standards.

Consumption (C)

Spending by households on goods and services.

Investment (I)

Spending by firms on capital goods such as machinery, buildings, technology and equipment.

Government Spending (G)

Spending by the government on goods and services, such as infrastructure, schools and hospitals.

Exports (X)

Goods and services produced domestically and sold to other countries.

Imports (M)

Goods and services produced overseas and purchased by people or firms in the domestic economy.

Net Exports

The value of exports minus imports ($\text{Net exports} = X - M$).

Aggregate Demand (AD)

The total spending on domestically produced goods and services in an economy, calculated as $AD = C + I + G + (X - M)$.

Productive Capacity

The maximum amount of goods and services an economy can produce with its available resources.

Productivity

The amount of output produced per unit of input.

Human Capital

The knowledge, skills, education and experience possessed by workers.

Physical Capital

Machinery, buildings, equipment and technology used to produce goods and services.

Circular Flow Model

A model showing how income, spending and production move between households and firms.

Withdrawals

Money removed from the circular flow, consisting of Savings ($S$), Taxes ($T$), and Imports ($M$).

Injections

Money added to the circular flow, consisting of Investment ($I$), Government spending ($G$), and Exports ($X$).

International Trade

The exchange of goods and services between countries.

Balance of Trade

The value of exports of goods minus the value of imports of goods.

Trade Surplus

An economic condition occurring when the value of exports is greater than the value of imports.

Trade Deficit

An economic condition occurring when the value of imports is greater than the value of exports.

Tariff

A tax placed on imported goods.

Quota

A limit on the quantity of a good that can be imported.

Protectionism

Government action designed to protect domestic industries from foreign competition through tariffs, quotas, subsidies, and import restrictions.

Free Trade

A policy condition occurring when countries trade with relatively few restrictions such as tariffs and quotas.

Specialisation

Occurs when a country concentrates on producing goods and services it can produce relatively efficiently.

Comparative Advantage

Occurs when a country can produce a good or service at a lower opportunity cost than another country.

Exchange Rate

The price of one country's currency measured in another country's currency.

Appreciation

An increase in the value of a currency relative to another currency.

Depreciation

A decrease in the value of a currency relative to another currency.

Inflation

A sustained increase in the general price level.

Inflation Rate

The percentage change in the general price level over time, calculated as $\text{Inflation rate} = \left(\frac{\text{New price level} - \text{Old price level}}{\text{Old price level}}\right) \times 100$.

Deflation

A sustained decrease in the general price level.

Purchasing Power

The amount of goods and services that can be bought with a given amount of money.

Demand-Pull Inflation

Inflation that occurs when aggregate demand increases faster than the economy's ability to increase output.

Cost-Push Inflation

Inflation that occurs when firms' costs of production increase, causing aggregate supply to decrease.

Stagflation

An economic situation occurring when inflation increases while real GDP decreases and unemployment increases.

Quantity Theory of Money

A theory explaining the relationship between the money supply ($M$), velocity of money ($V$), price level ($P$), and real output ($Y$) using the equation $MV = PY$.

AD-AS Model

An economic model showing the relationship between aggregate demand, aggregate supply, the price level, and real GDP.