AS Macroeconomics - definitions and notes

AS Macroeconomics - definitions and notes

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  • Created on: 23-01-12 13:04
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Key Words
Word Definition
Economics The allocation of scarce resources to
provide for unlimited human wants
Macroeconomics The study of the economy as a whole,
including, inflation, growth and
Depression A period when there is a particularly deep
and long fall in output
Recession A period when growth in output falls or
becomes negative. The technical
definition now used by governments is that
a recession occurs when growth in output
is negative for two successive quarters (6
Circular Flow Of Income A model of the economy which shows the
flow of goods, services and factors and
their payments around the economy
Closed Economy An economy where there is no foreign
Open Economy An economy where there is trade with
other countries
Hidden/Black/Informal Economy Economic activity where trade and
exchange take place, but which goes
unreported to the tax authorities and those
collecting national income statistics.
Workers in the hidden economy are
usually motivated by the desire to evade
paying taxes
Injections In the circular flow of income, spending
which is not generated by households
including investment, government
spending and exports
National Income The value of the output, expenditure or
income of an economy over a period of
Purchasing Power Parities An exchange rate of one currency for
another which compares how much a
typical basket of goods in one country
costs compared to that of another country
Transfer Payments Income for which there is no
corresponding output, such as
unemployment benefits or pension
Wealth A stock of assets which can be used to
generate a flow of production or income.
For example, physical wealth such as

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factories and machines is used to make
goods and services
Withdrawals/Leakages In the circular flow of income, spending by
households which does not flow back to
domestic firms.…read more

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structural unemployment are regional,
sectoral or technological unemployment
Consumer Price Index (CPI) A measure of the price level used across
the EU and used by the Bank of England
to measure inflation against its target
Costpush Inflation Inflation caused by increases in the costs
of production in the economy
Demandpull Inflation Inflation which is caused by excess
demand in the economy
Creeping Inflation Small rises in the price level over a long
period of time
Deflation A fall in the price level
Headline Rate…read more

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Current Account Deficit When imports are greater than exports
Current Account Surplus When exports are greater than imports
Invisibles Trade in services, transfers of income and
other payments or receipts
Visibles Trade in goods
Average Propensity To Consume The proportion of total income spent. It is
calculated by C ÷ Y
Average Propensity To Save The proportion of a total income which is
saved.…read more

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Aggregate Demand Curve Shows the relationship between the price
level and equilibrium National Income.…read more

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Fiscal Policy The decisions made about the spending,
taxes and borrowing of the government
used to control aggregate demand in the
National Debt The accumulated borrowings of
Overheating The economy overheats if aggregate
demand is increased when the economy
is already at its full productive potential.…read more

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managing the country's gold and currency
reserves and issuing government debt
Instrument Of Policy An economic variable, such as the rate of
interest, income tax rates or government
spending on education, which is used to
achieve a target of government policy
Monetary Policy The attempt by government or a central
bank to manipulate the money supply, the
supply of credit, interest rates or any other
monetary variables, to achieve the
fulfilment of policy goals such as price
Rate Of Interest The price of…read more

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Macroeconomics is concerned with the economy as a whole whilst
microeconomics is the study of individual markets within the economy.
National economic performance can be measured in a number of different ways.
Four key macroeconomic variables are the economic growth rate,
unemployment, inflation and the current account balance.
National Income can be measured in three ways: National Output, National
Expenditure or National Income.
The most commonly used measure of National Income is Gross Domestic
Product (GDP).…read more

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Economic growth is the change in potential output of the economy shown by a
shift to the right of the production possibility frontier (PPF). Economic growth is
usually measured by the change in real National Income.
Economic growth is caused by increases in the quantity or quality of land, labour
and capital and by technological progress.
National Income is often used as the main indicator of the standard of living in an
economy.…read more

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changes in the economy and cyclical unemployment caused by a lack of
aggregate demand.
The impact of immigration on employment and unemployment is complex
depending on the level of immigration, whether the economy is at full
employment and the skills of migrants.
The costs of unemployment include financial costs to the unemployed, to
taxpayers and to local and national economies. They also include nonfinancial
costs such as possible increased vandalism or increased suicides.
Inflation is a general sustained rise in the price level.…read more



got the exam later today. Thanks!


This 18 page document has most of the definitions required for AS macro economics and accompanying notes on some of the main concepts. It is wordy but visual learners can adapt the information.

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