Macroeconomics Quiz 2

Inflation

General or sustained increase in the average price level

Cost Push Inflation

Inflation resulting from an increase in the costs of production in the economy. E.g. increase in price of raw materials, imports, labour, etc.

Demand Pull Inflation

Inflation as a result of an increase in AD (consumption, investment, government spending, and net exports increasing).

Unemployment

Amount of people who are willing, able, and actively seeking employment, but unable to find it

Full Employment

Percentage of people structurally, frictionally, and seasonally unemployed, aka “natural rate of unemployment”

Labour Force

People of working age (18-65) who are employed or unemployed seeking work

Discouraged Workers

People who are of working age but have been unemployed and not currently looking for a job. They are not included in the workforce.

Disinflation

Occurs when the average price level continues to rise but at a slower rate. The rate of inflation is still positive but lower than previously recorded

Deflation

A sustained decrease in the average price level, or a negative inflation rate

CPI

average price of goods and services that consumers typically buy (market basket) expressed as an index.

Progressive Taxation

Taxation which takes a higher percentage of income from high-income earners

Regressive Taxation

Taxation which affects lower income earners more and consists of a larger percentage of their income. E.g. sales taxes which are fixed amounts per item.

Proportional Taxation

Taxation where the average tax rate remains the same regardless of income level causing everyone to pay the same percentage of their income.

Seasonal Unemployment

Unemployment which occurs when specific jobs are only offered periodically during certain times in the year.

Frictional Unemployment

Unemployment of people who are between jobs or recently removed from school.

Structural Unemployment

Unemployment from when there is a change in demand for particular skills in the labor market such as technological changes, geographical changes, or changes in patterns of demand for particular skills.

Cyclical Unemployment

Unemployment occurring due to a recession or a reduction in aggregate demand

Hidden Unemployment

Workers that have part-time or full-time jobs but have highly skilled qualifications but are not fully utilizing their efficiency, aka “underemployed”

Informal Economy

Economy made up of people employed as unregistered workers or illegal jobs.

Equity

Situations where different people are given different treatment to promote equity. Refers to the idea of “fairness”

Equality

Situations where economic outcomes are the same for all.

Social Mobility

The ability of people to climb or fall within the economic sectors of society

UBI

Universal transfer payment to every citizen to raise income levels

Gini Coefficient

Measure of distribution of income within an economy and determines the level of income inequality.

Absolute Poverty

Poverty where people earn below internationally defined levels of income, e.g. USD 1.90 per day. They lack access to basic necessities.

Relative Poverty

Having an income below the average level of income relative to their specific country.