economic growth

what does short run mean?

the actual annual percentage change in real national output

what does long run mean?

an increase in the potential productive capacity of the economy

what does GDP mean?

the value of goods and services produced in the economy over a period of time

what does real GDP mean?

the value of goods and services produced in the economy over a period of time taking into account inflation

what does nominal value mean?

expressed in monetary terms

what does real value mean?

takes into account inflation

what does total national income mean?

the value of all goods and services produced in a country

what does per capita income mean?

total income divided by the number of people in the country

what does volume mean?

looks at the quantity of goods and service produced in a country

what does value mean?

looks at the monetary worth of the goods and services produced in a country

what does Gross National Product mean?

GNP of a country is the value of all goods and services produced by domestic businesses both at home and abroad.
it included overseas assets

what does gross national income mean?

GNI of a country is its total level of income

what does a basket of goods mean?

represents consumer spending and is used to track changes in the prices of consumer goods and services over time

what does green GDP mean?

a measure of GDP which takes account of the environmental costs of production such as pollution and resource depletion

what is the hidden, black or informal economy?

economic activity where trade and exchange take place but which goes unreported to tax authorities and those collecting national income statistics

what is net national income?

a measure of national income which includes both net income from investments abroad and an allowance for depreciation of the nation's capital stock

what is purchasing power parties?

an exchange rate of once currency for another which compares how much a typical basket of goods in one country costs compares to that of another country

what is standard of living?

how well off is an individual, household or economy. measured by a complex mix of variables such as income, health, environment, participation in society and political freedoms

what are transfer payments?

income for which there is no corresponding output, such as employment benefits or pension payments

what is economic growth?

a rise in output in an economy which can be either actual or potential growth

what is an output gap?

the difference between the actual level of GDP and the productive potential of the economy

what is a positive output gap?

when actual GDP is above the productive potential of the economy and it is in a boom

what is a negative output gap?

when actual GDP is below the productive potential of the economy

what is a dividend?

if the business makes more profit, you as an investor are likely to receive a bigger return on your investment

what is structural employment?

people unemployed from an entire industry bc there isn't enough demand for that sector.
when the pattern of demand and production changes leaving workers unemployed in labour markets where demand has shrunk. examples are regional unemployment, sectoral unemployment or technological unemployment

what is a boom/peak?

period of time when the economy is growing strongly and is operating above its productive potential

what is demand-side shock?

a sudden and large impact on AD

what is a depression/slump?

a period of the trade cycle when there is a particularly deep and long fall in output

what is a downturn?

a period of the trade cycle when either economic growth or GDP is falling

what is economic recovery?

the movement back from where the economy is operating below its productive potential to a point where it is at its productive potential

what is export led growth?

a rise in AD caused by a rise in exports

what is hysteresis?

a process whereby a variable does not return to its former value when changed. in terms of the trade cycle, it is used to describe the phenomenon of an economy failing to return to its former long term trend rate of growth after a severe recession

what is actual growth?

economic growth as measured by recorded changes in real GDP over time

what is potential growth?

economic growth as measured by the change in the productive potential of the economy over time

what is a recession?

a period of the trade cycle when output or growth in output falls. occurs when growth is negative for two successive quarters

what is spare capacity?

for a whole economy, this exists when LRAS is greater than AD so there is a negative output gap

what is a side supply shock?

a sudden and large impact on AS

what is the trade/business/economic cycle?

regular fluctuation in the level of economic activity around the productive potential of the economy. the economy veers from recession to a boom

what is sustainable growth?

growth in the productive potential of the economy today which doesn't lead to a fall in the productive potential of the economy for future generations

what is inflation?

the rate of change in the average price level over time. general rise in prices

what is the consumer prices index (CPI)?

the speed at which the prices of the goods and services bought by households rise or fall

what is the retail prices index (RPI)?

it measures the change in the cost of a representative sample of retail goods and services

what is the money supply?

a measure of the amount or stock of money in the economy

what is demand-pull inflation?

inflation caused by excessive demand in the economy. there is too much money chasing too few goods and services

what is supply-push inflation?

this occurs when firms respond to rising costs of production by increasing prices. inflation caused by increases in the costs of production in the economy

what is deflation?

a decrease in the general price level

what is anticipated inflation?

increases in prices which economic actors are able to predict with accuracy

what is disinflation?

a fall in the rate of inflation

what is hyperinflation?

large increases in the price level

what is indexation?

adjusting the value of economic variables such as wages or the rate of interest in line with inflation

what is unanticipated inflation?

increases in prices which economic actors fail to predict accurately and so their decisions are based on poor information

what is unemployment?

the number of people looking for work but who cannot find a job at a point in time. occurs when individuals are without a job but are actively seeking work

what is the level of unemployment?

the number of people who are unemployed

what is the rate of unemployment?

the number of people unemployed as a % of the labour force

what is underemployment?

occurs when workers can not find a job that is suitable for their qualifications and experience or who cannot find enough hours to work. those who would work more hours if available or are in jobs below their skill level

what does active population mean?

those in work or actively seeking work; aka the labour force

what does activity/participation rate mean?

the number of those in work or unemployed ➗ the population of working age. expressed as %

what is cyclical/demand-deficient unemployment

when there's insufficient demand in the economy for all workers who wish to work at their current wages to obtain a job

what does employed mean?

number of people in paid work

what does employees mean?

workers employed by another individual or firm

what does employment mean?

those in paid work

what does employment rate mean?

the number of those in work ➗ the population of working age. expressed as %

what is frictional unemployment?

when workers are unemployed for short lengths of time between jobs

what are full-time workers?

workers who work hours and the days which are the norm for a particular job. usually over 35 hours per week.

what does hidden unemployed mean?

partly those in the population who would take a job if it was offered, but are not in work and are not currently seeking work; and partly those who are underemployed

what does inactive mean?

number of those not in work and not unemployed

what does inactivity rate mean?

number of those not in work and not unemployed ➗ the population of working age. expressed as %

what does labour force mean?

those in work or actively seeking work; aka active population

what does long-term unemployed mean?

in the UK, those unemployed for more than 1 year

what are part-time workers?

workers who only work a fraction of the hours and days which are the norm for a particular job. usually less than 35 hours in a week

what does the population of working age mean?

the total number of people aged between statutory school leaving age and the state retirement age

what does real wage or classical unemployment mean?

when workers are unemployed bc real wages are too high and inflexible downwards, leading to insufficient demand for workers from employees

what does seasonal unemployment mean?

when workers are unemployed at certain times of year

what does self-employed mean?

workers who work on their own account and aren't employees

what does short-term unemployed mean?

in the UK, those unemployed for less than a year

what does unemployed mean?

those not in work but actively seeking work

what does unemployment rate mean?

the number of those not in work but seeking work ➗ the labour force. expressed as %

what does balance of payments mean?

a record of a country's trade/transactions with the rest of the world. a record of all financial dealings over a period of time between economic agents of one country and all other countries

what is the balance of trade?

the value of visible exports minus visible imports

what is the capital and financial account?

the part of the BoP account where flows of savings, investment and currency are recorded

what is the current account?

the part of the balance of payments account where payments for the purchase and sale of goods and services are recorded

what is the current balance?

the difference between the value of total exports (visible and invisible) and total imports

what is the current account deficit?

when imports are greater than exports

what is the current account surplus?

when the value of exports are greater than imports

what are invisibles?

trade in services, transfers of income and other payments or receipts

what are visibles?

trade in goods

is short run actual or potential growth?

actual

is long run actual or potential growth?

potential

what does actual growth look like on a PPF?

what does actual growth look like on an AD-AS diagram?

what does potential growth look like on a PPF?

what does potential growth look like on an AD-AS diagram?

what are the benefits of using real values as a measurement?

allow for more accurate comparisons of GDP over time as it take inflation into account

how do you calculate real national output?

nominal national output ➗ average price level

how is short run economic growth measured?

it is measured by the annual % change in real national output, real national income or real GDP

what was the growth level in the UK jan '23?

-1.3

what is total national income?

the value of all goods and services produced in a country

when do we use real national income?

gives a meaningful comparison when comparing the size of the economy of different countries
- we need to take into account the population of each country when we compare them

what does real per capita income allow us to compare?

the standard of living of individuals within each country

what is the difference between GDP and GNP?

GDP is inside the border while GNP is outside the border