something that is expected to provide a benefit to the owner in the future
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balance of payments
the record of all financial transactions between one country and the rest of the world
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balance of payments on the current account
the total of net trade in goods and services, income flows and transfers between one country and the rest of the world
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balanced current account
where the sum of exports plus the inflow of income and transfers is equal to the sum of imports plus the outflow of income and transfers
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balanced government budget
when tax revenue is equal to government spending
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bank rate
rate set by the bank of England that influences all other rates of interest in the country
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boom
a period of high economic activity and high levels of employment
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budget deficit
when government spending is greater than tax revenue
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budget surplus
when tax revenue is greater than government spending
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building society
a mutual financial institution that is owned by its members. its primary objectives are to receive deposits from its members and to lend money for members to purchase property
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claimant count
the method of measuring unemployment according to the number of people who are claiming unemployment-related benefits
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collective bargaining
negotiations between a recognised trade union and employer/s
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consumer price index (CPI)
method used to calculate the rate of inflation
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cost of living
the price level of goods and services bought (by the average family)
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currency
the system of money used in a country or group of countries
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current account
the record of trade in goods and services, income flows and transfers between one country and the rest of the world
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current account deficit
where the sum of exports plus the inflow of income and transfers is less than the sim of imports plus the outflow of income and transfers
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current account surplus
where the sum of exports plus the outflow of income and transfers is greater than the sum of imports plus the outflow of income and transfers
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cyclical unemployment
unemployment caused by a lack of demand in the economy
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derived demand
occurs when a product or factor of production is not demanded for itself, but is dependent on the demand for the product it helps to produce
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developed country
a country with high GDP per capita and developed industry and service sectors
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development
the process of increasing peoples standard of living and wellbeing over time
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diseconomies of scale
when the average cost of production begin to increase as a firm grows in size
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distribution of income
how incomes are shared out between individuals and households
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distribution of wealth
how wealth is shared out between individuals and households
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economic choice
an option for the use of selected scarce resources
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economic growth
growth in GDP (value of output) over time
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economic problem
how to best use limited resources to satisfy unlimited wants of people
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effective demand
the quantity of a good or service that an individual is both willing and able to buy at a range of prices in a given time period
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elastic supply
when the percentage change in quantity supplied is greater than the percentage change in price
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employment
the use of labour in the economy to produce goods and services
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European union (EU)
an economic and political group of countries in Europe that have free trade with each other
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exchange
The giving up of something that the individual or firm has, in return for something they wish to have but do not possess.
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exchange rate
The price of one currency in terms of another currency.
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exports
goods and services sold abroad
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factors of production
The resources in an economy that can be used to make goods and services, e.g. land, labour, capital and enterprise.
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financial sector
Consists of financial organisations and their products, and involves the flow of capital.
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free trade agreement
Free movement of goods and services between countries, without any restrictions.
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GDP per capita
GDP divided by the population.
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globalisation
The expansion of world trade in goods and services, together with capital flows, leading to greater international interdependence.
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government revenue
The source of finance for government spending.
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gross domestic product (GDP)
the total value added of goods and services produced in the country in a year
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imports
goods and services bought from abroad
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income and wealth redistribution
Government action, using mainly taxation and benefits, to reduce inequalities of income and wealth.
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income tax
A tax levied directly on personal income, i.e. a tax on a person's wages.
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indirect tax
A tax on spending, often defined as a tax on goods and services.
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inelastic supply
When the percentage change in quantity supplied is less than the percentage change in price.
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inflation
A sustained rise in the general price level over time.
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interest rate
The price of borrowing money, and the reward for saving money.
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international trade
The exchange of goods and services between countries.
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invisible hand
Unobservable market forces assist demand and supply of goods and services in a free market to move automatically to an equilibrium position.
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less developed country
a country with a developing economy that has lower GDP per capita, lower levels of industrialisation and weaker indicators of wellbeing
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market economy
an economy in which scarce resources are allocated by the market forces of supply and demand
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medium of exchange
anything that sets the standard of value of goods and services acceptable to all parties involved in a transaction
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monetary policy
a policy which aims to control the total supply of money in the economy to try to achieve the government’s economic objectives, particularly price stability
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money
Anything that is generally accepted as a means of payment for goods and services.
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multinational corporation (MNC)
A firm that has its head office in one country, but has operations in a number of other countries.
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price
The sum of money you have to pay for a good or service. It is determined by the interaction of supply and demand.
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price stability
When the general level of prices stays constant over time, or grows at an acceptably low rate.
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private sector (private enterprise)
Part of the economy that is run by individuals, firms and organisations and not by the government. Private sector organisations are called private enterprises.
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privatisation
The transfer of assets such as businesses from the public sector to the private sector.
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rate of inflation
The percentage rise in the general price level over time.
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rate of interest/ interest rate
the cost of borrowing money, i.e. that which is paid to the lender. it is also the reward for saving
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recession
A period when the country's GDP falls for two (or more) consecutive quarters.
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salary
A yearly wage divided equally into 12 (monthly) parts.
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specialisation
The process by which individuals, firms, regions and whole economies concentrate on producing those products that they are best at producing.
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standard of living
The social and economic wellbeing of residents in a country.
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subsidy
An amount of money the government gives directly to firms to encourage production and consumption.
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supply-side policy
Policy that increases the productive potential, which is the ability of the economy to supply more goods and services.
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tax
a compulsory payment to the government
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wealth
The market value of all the assets owned by a person, group or country at a specific point in time. Wealth is a stock of assets, e.g. money, houses and land, whereas income is a flow over time.
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fiscal policy
Fiscal policy involves the government changing the levels of taxation and government spending in order to influence aggregate demand (AD) and the level of economic activity
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