2180356
Description
Flashcards by Joshua Burrows, updated more than 1 year ago
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Created by Joshua Burrows
over 9 years ago
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| Question | Answer |
| Accelerator effect | The relation between the change in new investment and the rate of change of national income |
| Actual supply | The amount that producers in fact produce. This may differ from planner supply for a variety of reasons such as breakdowns in production, staff absences, etc |
| Aggregate demand | Total planned expenditure in the economy. Known as C+I+G+(X-M) |
| Aggregate supply | The total value of goods and services supplied in the economy |
| Balance of payments | Exports minus imports - a deficit means more is imported than exported |
| Balance of trade | Visible exports minus visible imports |
| Balanced budget | Where government receipts equal government spending in a financial year |
| Budget deficit | Where government spending exceeds government receipts in a financial year |
| Budget surplus | Where government receipts exceed government spending in a financial year |
| Buffer stock | An intervention system that aims to limit the fluctuations of the price of a commodity |
| Capital spending | Government spending to improve the productive capacity of the nation, including infrastructure, schools, and hospitals |
| Commodity | A good that is traded, but usually refers to raw materials or semi-manufactured goods that are traded in bulk such as tea iron ore, oil, or wheat. Often unbranded. |
| Competition | A market situation in which there are a large number of buyers and sellers |
| Complementary goods | Goods that are consumed together, for example, bread and butter, or DVDs and DVD players |
| Complete market failure | Where the free market fails to provide a product at all, i.e. the case of public goods |
| Composite demand | A good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the available supply for the other purpose, typically leading to higher prices, e.g. milk used in butter and cheese |
| Contractionary fiscal policy | Increasing levels of tax revenue relative to government spending, appropriate during a boom in economic activity |
| Cost push inflation | Where increased costs of production result in firms increasing their prices leading to an increase in the general price level |
| CPI (Consumer Price Index) | A measure of the price level used widely in the Eurozone. Used since 2004 as the target measure for inflation by the government and MPC |
| Credit crunch | Where borrowing becomes more expensive or unavalible |
| Current account equilibrium | Where the current account exercises no effect on the domestic macroeconomy |
| Cyclical unemployment | Demand deficient unemployment that occurs as a result of the economic cycle |
| Deflation | A situation where prices persistently fall |
| Deindustrialisation | A fall in the proportion of national output account for by the manufacturing sector of the economy |
| Demand | The amount that consumers are willing and able to buy at each given price level |
| Demand deficient unemployment | Insufficient AD in the economy to employ the available labour |
| Demand pull inflation | Where AD exceeds AS leading to an increase in the level of prices |
| Demand-side fiscal policy | Changes in the level or structure of government spending and taxation aimed at influencing one or more of the components of AD |
| Demerit good | A good that would be over-consumer in the free market, as it brings less overall benefit to consumers than they realise |
| Deregulation | The process of removing government controls from markets |
| Derived demand | When the demand for one good or service comes from the demand for another good or service. The demand for cars stimulates the demand for steel, therefore the demand for steel is derived demand |
| Discretionary fiscal policy | The deliberate manipulation of government spending and taxation to influence the economy |
| Diseconomies of scale | Where an increase in the scale of production leads to increases in average total costs for firms |
| Disequilibrium | A situation within the market where supply does not equal demand |
| Disposable income | Income available to households after the payment of income tax and national insurance contribution |
| Division of labour | Breaking the production process down into a sequence of tasks, with workers assigned to particular tasks |
| Economic goods | Goods that are scarce and therefore have an opportunity cost |
| Economic growth | The capacity of the economy to produce more goods and services over time |
| Economic welfare | Refers to the benefit or satisfaction an individual or society gets from the allocation of resources. We can attempt the measure the welfare of individuals but really we want to understand the overall effects on society as a whole - hard to define |
| Economies of scale | Where an increase in the scale of production leads to reductions in average total costs for firms |
| Effective demand | Demand supported by the ability to pay for a good or service |
| Excess demand | When demand is greater than supply at a given price |
| Excess supply | When supply at a particular price is greater than demand, this should signal to producers to lower prices |
| Exchange rate | The price at which one currency, e.g. the pound, exchanges for another, e.g. the US dollar |
| Expansionary fiscal policy | Increasing levels of government spending relative to tax revenue, appropriate to stimulation AD during a downturn in economic activity |
| Exporting | The sale of goods or services to a foreign country - generates income for the home country |
| Externalities | Costs or benefits that spill over to third parties external to a market transaction |
| Factor market | The market for the factors of production that make other goods and services such a labour or raw materials |
| Information failure | Where economics agents do not properly perceive the benefits or disadvantages of a trasaction |
| Fiscal policy | The policy of the government regard taxation and government expenditure |
| Fixed costs | Cost of production that do not vary as output changes |
| Free goods | Good that have no opportunity cost |
| Free-market economy | One in which there is very limited government involvement in providing goods and services. its main role is to ensure that the rules of the market are fair so that, for example, people cannot steal each other's property |
| Free-rider problem | Where some consumers benefit from other consumers purchasing a good, particularity in the case of public goods |
| Frictional employment | People between jobs |
| GDP per capita | GDP divided by the population - a measure of living standards |
| Geographical immobility | Where workers find it difficult to move to where employment opportunities may be, due to family ties and differences in housing costs |
| Globalisation | The ability to produce goods anywhere in the world and sell them in any country |
| Goods and services | Goods are considered to be tangible products that we can touch such as CDs or a car. These are distinct from services which are not tangible such as a trip to the cinema |
| Government failure | When government intervention to correct market failure does not improve the allocation of resources or leads to worsening of the situation. The costs of government intervention may therefore exceed the benefits |
| GDP | The total value of goods and services produced in the economy |
| Hot money | Money that is liable to rapid transfer from one country to another |
| Human capital | The skills, abilities, motivation, and knowledge of labour. Improvements in human capital raise productivity and can shift the PPB to the right |
| Importing | The purchase of goods and services from abroad - leads to expenditure for the home country |
| Incidence of tax | The proportion of a tax that is passed onto the consumer. If most of a tax rise is added to the consumer then the incidence of tax is said to be 'high'. When demand is price inelastic then the incidence of tax tends to be high |
| Income | A flow of earnings to a factor of production over a period of time, e.g. wages or salaries |
| Income elasticity of demand | The proportion to which demand changes when there is a change in income |
| Inferior goods | Goods or services that will see demand fall when income rises |
| Inflation | A persistent increase in the level of prices |
| Injections | Money that originates outside the circular flow and so will increase national income/output/expenditure |
| Interest rates | The cost of borrowing or reward for saving |
| Investment | Spending by firms on buildings, machinery, and improving the skills of the labour force |
| Invisibles | Intangibles such as the provision of insurance or banking services |
| Joint supply | When the production of one good also results in the production of another |
| Keynesian | The view of John Keynes, a very influential UK economist who suggested how governments could cure mass unemployment |
| Labour market | An example of a factor market, in this case where labour is bought and sold |
| Law of unintended consequences | When the actions of consumers, producers, and governments have effects that are unanticipated |
| Long-run AS | the economy's productive capacity |
| MEB (marginal external benefit) | The spillover benefit to third parties of an economic transaction |
| MEC (marginal external cost) | The spillover cost to third parties of an economic transaction |
| MPB (marginal private benefit | The benefit to an individual or firm of an economic transaction |
| MPC (marginal private cost) | The cost to an individual or firm of an economic transaction |
| MSB (marginal social benefit) | The full benefit to society of an economic transaction, including private and external benefits |
| Market-clearing price | The price at which all goods are supplied will be demanded |
| Market demand | Total demand in a market for a good, the sum of all individuals' demand, at each given price |
| Market failure | Where the market fails to produce what consumers require at the lowest possible cost |
| Market supply | The sum of all individual firm's supply curves at each given price |
| Maximum price | A price ceiling above which the price of a good or service is not allowed to increase |
| Merit good | A good that would be under-consumer in a free market, as individuals do not fully perceive the benefits obtained from consumption |
| Minimum price | A price floor below which the price of a good or service is not allowed to decrease |
| Monetary policy | Controlling the macroeconomy via changes in the monetary variables such as the money supply or interest rates |
| Monetary Policy Committee (MPC) | A committee of economists and central bankers who meet monthly and decide whether or not to change the rate of interest |
| Monopoly | A market structure dominated by a single seller of a good |
| Multiplier effect | Where an increase increase or decrease in spending leads to a larger than proportionate change in the national income |
| Narrow money | Notes, coins, and balances available for normal transaction |
| Negative externalities | Costs imposed on a third party not involved with the consumption or production o f the good |
| Negative output gap | Where the economy is producing less than its trend output |
| Normal goods | Goods or services that will see an increase in demand when incomes rise |
| Normative statements | Opinions that require value judgements to be made |
| Occupational immobility | As patters of demand and employment change, many workers may find it difficult to easily secure new jobs, since they may lack the necessary skills |
| Opportunity cost | The next best alternative forgone when an economic decision is made |
| Pollution permit | A permit sold to firms by the government allowing them to pollute to a certain limit |
| Positive externalities | A positive spillover effect to third parties of a market transaction |
| Positive output gap | When actual GDP exceeds trend GDP increasing inflationary pressure |
| Positive statements | Statements that can be tested against real world data |
| Price elasticity | The responsiveness of demand to a change in the price level. %Change in QD -------------------- %Change in P |
| Private good | A good that is both excusable and rival in consumption |
| Privatisation | Sale of government-owned assets to the private sector |
| Production | The process that converts factor inputs into outputs of goods and services |
| PPB | The PPB indicates the maximum possible output that can be achieved given a fixed set of resources and technology in a particular time period |
| Productive efficiency | When a firm operates at minimum average total costs, producing the maximum possible output from inputs into the production process |
| Productivity | A measure of efficiency, measuring the ratio of inputs to outputs; the most common measure is labour productivity, which is the output per worker |
| Public good | A good that possesses the characterisitics of non-excludability and non-rivalry in consumption |
| Quasi-public good | A good that has some qualities of a public good but does not fully possess the two required characteristics or non-rivalry and non-excludability |
| Specialisation | The production of a limited range of goods by an individual factor of production or firm or country, in cooperation with others so that together a complete range of goods is produced |
| Subsidies | Payments by government to producers to encourage production of a good or service. Often subsidies are found in farming where farmers receive funds from governments per tonne or unit of output |
| Substitutes | Goods that can be used as alternatives to another good, for example bus and rail services, or Pepsi and Coke. Close substitutes are good alternatives, whereas weak substitutes are not very good or likely alternatives, such as gas power vs hydroelectric power |
| Supply | The amount offered for sale at each given price level |
| Supply-side fiscal policy | Changes in the level or structure of government spending and taxation designed to improve the supply side of the economy through influencing incentives to save, to supply labour, to be entrepreneurial and to promote investment. |
| Supply-side policies | A range of measures designed to increase AS and hence the potential output of the economy, though many improvements may come from the private sector |
| Tight labour market | Where firms have to increase wages to attract the labour that they require |
| Trade union | An organisation of workers set up to negotiate on wages, working hours and working conditions with employers on behalf of its members |
| Trade-off | Where one macroeconomic objective has to be curtailed in favour or another objective |
| Unemployment | Those without a job but who are seeking work at current wage rates |
| Unemployment trap | Where individuals receive more in benefit payments than they would be paid if in a job |
| Value judgements | Statements or opinions that are not testable or cannot be verified and depend very much on the views on the individual and the values they hold |
| Wealth | Stock of owned assets, e.g. housing property or a portfolio of shares |
| Withdrawals | Any money not passed on in the circular flow and has the effect of reducing national income/output/expenditure |
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