Macroeconomics SL

macro

aggregate demand (AD)

total demand for all goods and services in an economy at a given price level

aggregate demand curve

a curve showing the inverse relationship between price level and Qd

Aggregate supply (AS)

the total output that firms are willing and able to produce in an economy

budget deficit

government spending > revenue

business confidence

how optimistic businesses feel about the economy’s future

business cycle

fluctuations in economic activity over time, typically growth or recession

carbon tax

taxes on the carbon content of fuels to reduce pollution

central bank

the national institution that manages monetary policy and the currency

circular economy

an economic system that aims to eliminate waste and continually reuse resources

circular flow of income

a model showing how income flows between households and firms

consumer confidence

measures how optimistic hoseholds are about future income and spending

Consumer price index (CPI)

measures changes in the average price level based on a basket of goods

consumption (C)

a component of AD. total spending by households on goods and services

contractionary monetary policy

central bank measures (raising interest rate and lowering money supply) to reduce AD and inflation

cost-push inflation

inflation caused by rising costs of production (raw materials, FoP)

crowding out (effect)

when government borrowing raises interest rates, reducing private investment

cyclical unemployment (demand-deficient)

unemployment caused by insufficient AD

deflation

a persistent decrease in general price level

deflationary gap (recessionary gap)

when actual output is below potential output in an economy

demand-pull inflation

inflation caused by excessive demand in an economy

deregulation

the removal of government controls to encourage competition

disinflation

a fall in the rate of inflation (but still positive inflation), inflation decelerates

economic growth

an increase in the quantity of goods and services produced, rise in real GDP over a period of time

economic wellbeing

the quality of life based on income, security and opportunity

expansionary monetary policy

central bank tools (lower interest rates and increase money supply) to boost AD

fiscal policy

government spending and taxation used to influence AD

foreign sector

the part of economy involved in imports and exports

full employment level of output

the output when all resources are used efficiently, with only natural rate of unemployment

gini coefficient (index)

a number between 0 and 1, measures income inequality

government (national) debt

total borrowing by the government

government spending (G)

a component of AD. expenditure by the government on goods, services and transfers

Gross domestic product (GDP)

total value of final goods/services produced within a country in a eyar

Gross national income (GNI)

GDP plus net income earned from abroad

income

earnings from providing labour or capital

inflation

an increase in general price level

inflation rate

the percentage increase in the general price level over time

inflationary gap

when actual output exceeds potential output

informal market

economic activity not taxed or regulated by the government

infrastructure

fundamental physical systems supporting the economy e.g. roads and energy

injections

addition to the circular flow - investment, government spending, exports

interest rate

cost of borrowing, reward for saving

investment (I)

a component of AD. Spending on capital goods to increase future production

leakages

withdrawals from the circular flow - savings, taxes, imports

long run aggregate supply (LRAS)

output when all resources are fully employed

Lorenz curve

a graph showing income distribution in a society

mixed economy

an economy with both market and government decision-making

monetary policy

central bank actions involving interest rates and money supply to infleunce the economy

money supply

total quantity of money in the economy at a given time

national income

total income earned in a country over one year

natural rate of unemployment

unemployment that exists when the economy is at full capacity

Net exports (X-M)

a component of AD. The value of exports minus the value of imports

nominal gross domestic product

GDP measured in current prices, GDP without inflation

nominal interest rate

standard rate of interest, without inflation

official borrowing

loans taken by governments from international institutions or other countries

planned economy

an economy where decisions are made centrally by the government

price deflator

index used to adjust nominal GDP to real GDP

productive capacity

total output an economy can produce with full resource use

quantitative easing

central bank buys assets to inject money into the economy

real GDP

GDP adjusted for inflation

real GDP per capita

real GDP divided by the population

real GNI per capita

real GNI divided by population, includes foreign income

real interest rates

nominal interest rate adjsuted for inflation

reserve assets

foreign currencies or gold held by a central bank

seasonal unemployment

joblessness due to predictable seasonal shifts in demand

short-run aggregate demand (SRAS)

output supplied when some production costs are fixed

structural unemployment

long term joblessness due to mismatches in skils and job needs

supply side policies

policies aimed at increase potential output by improving productivity

unemployment

the number of people actively seeking work but without a job (willing to work but jobless)

unemployment benefits

financial support from the government for unemployed people

unemployment rate

the percentage of the labour force that is unemployed

wealth

the total value of assets owned

Purchasing Power Parity (PPP)

Compares economic productivity and standards of living between countries on the basis of relative costs of goods and services. Used to understand how much goods and services the total GDP may purchase.

privatisation

action of government selling state-owned enterprises; transfer of ownership from public sector to private sector. Government adds revenue and expects improved efficiency (that can help boost economy)

state-owned enterprise

a firm where government has significant financial stake and control, e.g. post office. China has a lot.

capital gains tax

tax a firm pays on profit it makes from selling an asset, may lower price of a property e.g. factory