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macroeconomics
Study of large economic systems such as those of a whole country or area of the world
economic growth
The rise in the level of national output over a period of time
budget deficit
Amount by which government spending is greater than government revenue
national income
Value of income, output or expenditure over a period of time
GDP
Total value of FINAL goods and services produced in a year
Boom
Peak of the economic cycle where GDP is growing at its fastest.
Depression
Bottom of the economic cycle where GDP starts to fall with significant increases in unemployment
Downturn
Period in the economic cycle where the economy (GDP) is still growing but at a slower rate.
recession
Period of temporary economic decline (at the bottom of the business cycle), GDP may be flat or is negative. Trade and industrial activity are reduced, Rising unemployment and poverty.
aggregate demand
The total demand in the economy including consumption, investment, government expenditure and exports minus imports.
deflation
Decrease in average price level over a period of time
inflation
Increase in average price level over a period of time
hyperinflation
Very high level of inflation. Rising prices get out of control.
consumer price index (CPI)
Measure of the general price level (excluding housing costs
retail price index (RPI)
Measure of the general price level which includes house prices and council tax
Demand-pull inflation
Inflation caused by too much demand in the economy for goods and services. Demand>Supply
Cost-push inflation
Inflation caused by rising business costs (costs of production)
Interest rate
Price of money; the price of borrowing and amount earned when saving
Purchasing power of money
Amount of goods and services that can be bought with a fixed sum of money.
Menu costs
Costs to firms of having price changes, e.g. on the menu, brochure, poster
Shoe leather costs
Costs to firms and consumers of searching for new (good, cheaper) suppliers when inflation is high.
Unemployment
When those actively seeking work but unable to find a job
Cyclical unemployment
Unemployment caused by falling demand as a result of downturn in the economic cycle.
structural unemployment
Unemployment caused by changes in the structure of the economy such as the decline in and industry
frictional unemployment
When workers are unemployed for a short period of time as they move from one job to another.
seasonal unemployment
Unemployment caused when seasonal workers, such as those in the holiday industry, are laid off because the season has ended.
voluntary unemployment
Unemployment resulting from people choosing not to work.
balance of payments
Record of all transactions relating to international trade
current account
Part of the balance of payment where all exports and imports are recorded.
Capital and financial account
Part of the balance of payments where flows of saving, investment and currencies are recorded.
Exports
Goods and services sold overseas.
Imports
Goods and services bought from overseas.
Current balance
Difference between the total value of exports and imports.
current account deficit
When the value of imports exceeds the value of exports.
Current account surplus
When the value of exports exceeds the value of imports.
balance of trade (visible balance)
The difference between visible exports and visible imports.
invisible trade
Trade in services
Visible trade
Trade in physical goods
primary income
Money received from the loan of production factors abroad
secondary income
Government transfers to and from overseas agencies such as the EU.
exchange rates
Price of one currency against another.
income inequality
The differences in income that exist between different individuals.
absolute poverty
Where people do not have enough resources to meet all of their basic human needs.
relative poverty
Where individuals or households are poor in comparison to the rest of the population.
progressive taxation
Where the proportion of income paid in tax rises as the income of the taxpayers.
regressive taxation
Tax system that places the burden of tax more heavily on the poor.
fiscal policy
The use of taxes and government spending to influence the aggregate demand in the economy.
budget
Government’s spending and revenue plans for the next year.
fiscal deficit
Amount by which government spending exceeds government revenue.
fiscal surplus
Amount by which government revenue exceeds government spending.
direct taxes
Government charges on income and wealth, e.g. income taxes.
indirect taxes
Government charges on spending, e.g. VAT
VAT (value-added tax)
Tax on some goods and services - businesses pay value-added tax on most g&s they buy and if they are VAT registered, charge value-added tax on the g&s they sell.
national debt
Total amount of money owed by a country.
expansionary fiscal policy
Fiscal measures designed to stimulate demand in the economy.
contractionary fiscal policy
Fiscal measures designed to reduce demand in the economy.
monetary policy
Use of interest rate and the money supply to control aggregate demand in the economy.
money supply
Amount of money circulating in the economy.
aggregate supply
Total amount of goods and services produced in a country at a given price level in a given period of time.
supply-side policy
Government measures designed to increase aggregate supply in the economy.
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