Macroeconomics key term flash cards

Questão	Responda
Budget deficit	When government spending is greater than tax revenue
Business confidence	Expectations about the future of the economy
Capital stock	The vela elf the total stock of capital inputs in the economy
Claimant count	The number of people claiming unemployment-related benefits
Constant prices	Means that the data has been inflation adjusted
Consumer confidence	Expectations about the future of the including IRs, incomes and jobs
Consumer Price Index	A measure of the price level in the economy based on the collection of products designed to reflect the consumption basket of the average consumer
Cost Push inflation	An increase in the price level caused by a sustained increase in the costs of production
Creeping inflation	Small rises in the general price level over a long period
Current account	The overall balance of credits minus debits for trade in goods, trade in services, investment income and transfers
Current account deficit	The amount by which money relating to trade, investment etc. going out of a country is more than the amount coming in. A current account deficit implies a net fall of demand in a country's circular flow.
Cyclical trade deficit	A trade deficit that arises purely due to changes in the economy's cycle, for example many countries run a trade deficit when their economy is growing strongly
Cyclical unemployment	Unemployment caused by a lack of AD for goods and services, where national output < than potential output leading to a negative output gap
Deflation	A persistant fall in the general price level of goods and services
Depreciation	A fall in the market value of one exchange rate against another
Depression	Used to describe a severe recession which may become a prolonged downturn in the economy and where a nation's GDP falls by at least 10%
Discouraged workers	People often out of work for a long time who give up on job search
Disposable income	Gross income after the deduction of income tax and national insurance contributions plus cash welfare benefits. Disposable income is the money that comes into a household from various sources, including welfare benefits but after taxes on income
Double dip recession	When an economy goes into recession twice without a full recovery in between
Economic cycle	Variations in the annual rate of growth of an economy over time
Economic growth	An increase in the real value of goods and services produced in a country or area as measured by the annual % change in real national output. Also a long-run increase in the country's productive capacity
Economic shocks	Unpredictable events such as volatile prices for oil, gas and foodstuffs
Economic stability	When growth, prices and unemployment do not change much from year to year
Economically active	Those who are unemployed and actively seeking work
Economically inactive	Those who are of working age but a neither in work nor actively seeking work
Exchange rate	The rate at which one currency can be exchanged for another
Expansionary Monetary policy	A relaxation of monetary policy means an attempt to use an expansionary monetary policy to boost AD, output and jobs - includes lower IRs
Expectations	How we expect the future to unfold
Fiscal austerity or fiscal tightening	Fiscal austerity refers to decisions by the government to reduce the amount of government borrowing (e.g. cut the size of a fiscal deficit) over a period of years
Fiscal deficit	When government expenditure is higher than the revenue from tax receipts
Fiscal policy	A government's policy regarding taxation and public spending. It can be loose (with emphasis on increased spending and lower tax revenue to boost economic activity, with the acceptance of a wider fiscal deficit) or tight (with the emphasis on cutting spending and boosting tax revenue, resulting in a slower economy.
Fiscal stability	Many governments seek to maintain a degree of balance between tax revenues and public sector spending. A balanced budget is one in which spending equals revenue.
Fiscal stimulus	Government measures, normally involved increased public spending and lower direct and/or indirect taxation, aimed at giving a positive jolt to economic activity
Foreign Direct Investment (FDI)	FDI is investment from one country into another (normally by companies rather than governments) that involves establishing operations or acquiring tangible assets, including stakes in other businesses.
Gross Domestic Product (GDP)	Total value of output in the UK and is used to measure change in economic activity
Gini Coefficient	A measure of the extent to which groups of households, from the bottom of the income distribution upwards, receive less than an equal share of income.
Gross National Income (GNI)	Income generated from the resources owned by inhabitants and businesses of a given country
Government debt	The total stock of unpaid debt issued by government. A government will normally borrow money by issuing bonds or other securities.
Gross Domestic Product per capita	National income per head of population, a baseline measure of living standards.
Human capital	Investment in education and training to increase the quality of the labour force and to make people more flexible in a changing world of work.
Human Development Index	An index to assess comparative levels of development in countries, quantified in terms of literacy, life expectancy and purchasing power.
Hysteresis	When a sustained period of low AD can lead to permanent damage to the supply of the economy
Immobility of labour	Barriers to the movement of people between areas and between jobs
Inflation	A sustained increase in the general price level for goods and services
Inflation expectations	The rate of increase of consumer prices expected by consumers. Expectations can influence spending and saving decisions.
Inflation target	2%
Inflationary pressures	The demand and supply-side pressures that can cause a rise in the general price level. Demand-pull inflationary pressure is greatest when actual GDP exceeds potential GDP causing a positive output gap. Cost-push inflationary pressure can arise from increases in unit wage costs, rising import prices and an increases in raw materials.
Investment	Spending on capital goods including plants, machinery and infrastructure
Keynesian economics	The belief that the state can directly stimulate demand in a stagnating economy.
Keynesian unemployment	Unemployment caused by a lack of AD in the economy - a deficiency of private sector spending causes output and employment to contract
Labour shedding	Cuts back in employment often seen in a slowdown or a recession
Labour shortages	When businesses find it difficult to recruit the workers they need.
Labour supply	The number of people able, available and willing to work at prevailing wage rates
Lagging indicators	Indicators which tend to follow economic cycles e.g. unemployment
Leading indicators	Indicators which predict future economic trends e.g. consumer confidence
Macroeconomic performance	The overall performance in terms of output, prices, jobs, trade and living standards.
Propensity to consume	The proportion of any change in income that is spent rather than saved
Propensity to save	The proportion of any change in income that is saved rather than spent
Marginal rate of tax	The rate of tax on the next unit (£1) of income earned.
Monetary Policy Committee (MPC)	9 people from the B of E meet up every month to discuss interest rates
Monetary stimulus	Changes in monetary policy designed to increase the aggregate demand including lower policy interest rates and measures to increase the supply of credit.
Money supply	The entire quantity of a country's commercial bills, coins, loans and credit.
Multiplier effect	If there is an initial injection into the economy, then the final increase in AD and real GDP will be greater
National Debt	A government's total outstanding debt - effectively what the government still owes from the budget deficits accumulated over time.
Negative interest rates	An interest rate that is below zero. For real interest rates, this can occur when the inflation rate is higher than nominal interest rates
Net investment	Gross investment minus an estimate for capital depreciation
Net inward migration	When the number of migrants coming into a country is greater than those leaving.
Net trade	The balance between the value of exports and imports
Nominal GDP	Monetary value of all goods and services produced expressed at current prices.
Nominal wage	The annual growth of wages unadjusted for inflation
Non-inflationary growth	Sustained growth of real national output whilst maintaining price stability
Output gap	Difference between actual and potential national output. A negative output gap means that an economy has a large margin of spare production capacity
Output measure GDP	The value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy etc.
Paradox of Thrift	If people save more during a recession, it will reduce consumption and thus AD will fall, impeding economic growth and, eventually, lowering the general level of savings.
Peak	The high point of the economic cycle beyond which a recession starts.
Per capita incomes	Income per head of the population - a measure of living standards
Price stability	When there is low inflation and the price changes that do occur have little impact on day-to-day decisions of people.
Productivity	A measure of efficiency e.g. output per person employed or output per person-hour
Propensity to import	Proportion of any change in income that is spent on overseas products
Propensity to save	Proportion of any change in income that is saved rather than spent
Purchasing power	The buying power of a unit of currency. It is inversely related to the rate of inflation.
Quantitive easing	The introduction of new money into the national supply by a central bank.
Real disposable income	Income after taxes and welfare benefits, adjusted for the effects of inflation
Real income	Nominal income adjusted for price changes, expressed at constant prices.
Real interest rate	Nominal rate of interest adjusted for inflation
Real wage	Nominal wage adjusted for the effects of inflation
Recession	A period of at least 6 months when an economy suffers a fall in output. Or a broadly-based contraction in output, employment, investment and confidence.
Recovery	A phase of the economic cycle, after a recession/depression, during which real GDP starts to increase and unemployment begins to fall
Remittances	Sending money to people in another country,
Slowdown	A fall in the rate of growth of an economy but not a full-scale recession
Slump	A sustained decrease in real GDP and a persistent rise in unemployment
Spare capacity	When a business is not making full use of its available capacity - theres are spare factors of production including land, labour and capital. When an economy has plenty of spare capacity, SRAS is elastic.
Stagflation	A combination of slow growth and rising inflation.
Structural budget deficit	The size of a fiscal (budget) deficit adjusted to take account of the effects of changes in the economic cycle.
Structural trade deficit	A trade deficit that arises due to supply-side weaknesses rather than a change in GDP or currency - caused by poor competitiveness
Structural unemployment	Unemployment that results from the decline in industry, which leaves people unemployed because they do not have the skills needed by industries that are growing.
Sustainable growth	Growth that meets the needs of the present without compromising the ability of future generations to meet their own needs. Growth that can continue without damage to the environment, or the exhaustion of non renewable resources.
Target	A target is an objective of government policy e.g. low inflation
Time lags	The time it takes for one change e.g a change in interest rates to affect other variables
Trade deficit	When a country has imports a greater value of goods and services than it exports. A trade deficit as a net withdrawal from the circular flow of income.
Trade-off	A trade-off implies that choices have to be made between different objectives of economic policy for example a trade-off between economic growth and inflation
Transmission mechanism	How a change in interest rates affects the various sectors of the economy
Trend growth	Long run average growth rate - mainly determined by changes in the stock of available factor inputs and slo improvements in productivity. Trend growth is represent by a rightward shift in LRAS
Twin Deficit	Refer to a situation where an economy is running both a fiscal deficit and also a deficit on the current of the balance of payments.
Under-employment	Workers are underemployed when they are willing to supply more hours of work than their employers are prepared to offer.
Unemployment trap	When the prospect of unemployment benefits dissuades those without work from taking a new job - creates a disincentives problem
Unit wage costs	Labour costs per unit of output
Wage price spiral	Whiter workers big for higher wages because they have seen their real income eroded by rising prices leading to more cost push inflation.
Wealth effect	The supposed link between changes in wealth and household spending.

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