12 Economics QCE

Aggregate demand

The level of expenditure on total production or output that is planned at various price levels

Aggregate supply

The level of total production or output that producers plan to supply at various price levels

Allocative efficiency

Where a country's productive resources are used in the economy in combinations that generate the maximum benefits for consumers and the nation

Analyse

Identify components and the relationship between them; draw out and relate implications

Automatic stabilisers

Those elements of non-discretionary fiscal policy that operate without the need for govt. action; that is; they automatically counterbalance changes in the level of economic activity

Basis point

One-hundredth of one percentage point, used when expressing differences in percentages such as cash rates

Boom

The phase of the trade cycle where the general level of economic activity is above average; it is characterised by full employment and inflationary pressure due to demand being in excess of supply

Budget

Statement of the government's estimated revenue and expenditure for the coming financial year

Budget Deficit

A negative budget balance (where G>T)

Budget Surplus

A positive budget balance (where T>G)

Cash rate

The interest rate that banks pay to borrow funds from other banks on overnight loans in the short-term money market

Competition policy

Policy aimed at making markets more competitive and preventing the abuse of market power

Consumer price index (CPI)

a measure of the average change in the price of a selected range (basket) of consumer goods and services

Cost-push inflation

Inflation that results from rising production costs

Cyclical unemployment

Unemployment due to a downturn in the economic cycle

Demand-pull inflation

Inflation that results from excessive demand

Deregulation

the relaxation or removal of government restrictions on the free operation of markets

Describe

Provide characteristics and features

Direct tax

Any tax that is borne by the person or firm on whom it is levied

Discretionary fiscal policy

Deliberate changes to fiscal policy instruments to influence the level of aggregate demand

Dynamic efficiency

The ability of an economy to respond to changing consumer demands by reallocating resources to new industries or production processes

Economic cycle

Alternate but irregular periods of prosperity and recession of an economy; also known as a business cycle or trade cycle

Economic growth

a sustained increase in the productive capacity of an economy over a specified period of time (usually one year) generally indicated by the increased availability of goods and services in the economy

Economic objectives

the most important goals of govt economic policy

Economic problem

the problem of deciding or choosing how to satisfy unlimited wants with limited resources

External stability

the situation in which there are no unwanted movements of foreign reserves in the balance of payments

Evaluate

Make a judgement based on criteria

Explain

Relate cause and effect; make the relationships between things evident; provide why and/or how

Fiscal policy

Measures undertaken by governments in relation to raising revenue through taxation and determining the nature of government expenditure aimed at influencing a nation's aggregate demand; can be discretionary or non-discretionary (automatic stabilisers)

Fiscal policy stances

The overall effect of a budget on the level of economic activity in an economy

Frictional unemployment

Unemployment related to time lags involved in the transition between jobs

Full employment

Situation where everyone who wants a job has a job; note there will always be some level of unemployment

Headline rate of inflation

The % change in prices over time, as measured by the CPI

Indirect tax

Any tax on aspects of economic activity other than income

Inflationary expectations

The opinion that households and firms have of the future rate of inflation

Inflation

the sustained increase in the general level of prices of a period of time measured by the increase in CPI

Inflation target

The band of inflation rates that a central bank sets as the target range for its implementation of monetary policy 2-3%

Inside lag

The time it takes to recognise that the state of the economy indicates the need to use counter-cyclical macroeconomic policy, decide on the appropriate policy response and implement it

Interest rates

The cost of borrowing or reward for lending money

Internal stability

a state of the economy in which there is full employment and acceptable levels of inflation

Lagging indicator

an indicator that provides information regarding changes in the economy after they occur in the economic cycle

Leading indicator

an indicator that provides information regarding changes in the economy before they occur in the economy cycle