Economics 2025 External Exam: Study Guide Vocabulary

Vocabulary flashcards covering key macroeconomic definitions and measurement concepts for the economics external exam.

Percentage change

Size of a movement over time: (Y2 minus Y1) divided by Y1, times 100

Percentage point change

The numerical difference between two percentages (1% to 2% is a 1 percentage point rise, not a 100% rise)

Basis point

1/100th of a percentage point. A 25 basis point rise takes the cash rate from 2.50% to 2.75%

Nominal vs real

Nominal is the face value; real is adjusted for price changes (applies to GDP, wages and interest rates)

Consumer price index (CPI)

Measures the change in the price of a basket of goods and services bought by households

Deflation

A sustained fall in the general price level

Stagflation

High inflation together with high unemployment and weak growth

Labour force underutilisation

People who are unemployed plus those who are underemployed (want more hours), as a share of the labour force

Participation rate

Share of the working-age population in the labour force (employed or looking for work)

NAIRU

Non-accelerating inflation rate of unemployment: the unemployment rate below which inflation tends to accelerate

Average propensity to consume (APC) / save (APS)

Share of total income that is consumed (C divided by Y) / saved (S divided by Y)

Structural deficit

A budget deficit that remains even when the economy is at full capacity, so it is not explained by the cycle