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  • Created on: 24-03-12 16:43

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RECESSION: Negative economic growth over two successive quarters
ECONOMIC GROWTH: An increase in the real output of the economy
LONG TERM GROWTH RATE: The average rate of economic growth sustained over a period of time
REAL GROSS DOMSTIC PRODICT PER CAPITA: The total output of the economy in a year, divide by the size of the
population adjusted for inflation
PRODUCTION POSSIBLITY BOUNDARY: Diagram of a simplified economy showing the maximum combination of
products that can be produced given maximum productive efficiency
ACTUAL GRWOTH: an increase in the productive potential of the economy matched by an increase in demand
POTENTIAL GROWTH: An increase in the productive potential of the economy, not necessarily matched by demand
OUTPUT GAP: The difference between the actual level of GDP and the productive potential of the economy
TRENT RATE OF ECONOMIC GROWTH: The longrun average increase in GDP
ECONOMIC CYCLE: The cyclical pattern of shortterm fluctuations in GDP from year to year
SUPPLYSIDE POLICIES: A range of measures designed to increase aggregate supply
ACTIVITY RATE/PARTICIPATION RATE: The proportion of the population of working age in a job or actively seeking
OCCUPATIONAL IMMOBILITY: The difficulties faced by workers wishing to change occupations due to not having the
required skills or qualifications
LABOUR PRODUCTIVITY: Output per worker per hour
GROSS DOMESTIC PRODUCT: output produced by resources within the UK
GROSS NATIONAL PRODUCT: Output produced by resources within the UK plus net property income from abroad
NATIONAL INCOME: Output produced by resources within the UK, plus net property income from abroad, minus
depreciation of the nations capital equipment
NONMONEISED SECTOR: Valuable economic activity where no money exchanges hands
PURCHASING POWER PARITY: Exchange rates that take into account how much a typical basket of goods in one
country costs compared to another country
HUMAN DEVELOPMENT INDEX: A measure of economic welfare based on the average of three indicators ­ standard of
living, life expectancy, and educational attainment
HUMAN POVERTY INDEXES: A measure of economic welfare based on four dimensions of human life, longevity,
knowledge, economic provisioning and social inclusion
MEASURE OF DOMESTIC PROGRESS: A measure of economic welfare designed to reflect progress in quality of life
and progress towards a sustainable economy by factoring in the social and environmental costs of growth, and benefits
of unpaid work such as household labour
MISERY INDEX: A measure of economic welfare constructed by adding the unemployment rate to the inflation rate
SUSTAINABILITY OF ECONOMIC GROWTH: Growth, which does not impose costs on future generations
BALANCE OF PAYMENTS: A record of the financial transactions over a period of time between a country and its trading
INVENTORY INVERSTMENT/STOCK BUILDING: Investment by firms in stocks of raw materials and stocks of finished
goods ready to be sold
DEMAND PULL INLFATION: Inflation resulting from too much demand in the economy relative to supply capacity
ACCELERATOR THEORY: The theory that the level of investment is related to past changes in national income
MULTIPLIER EFFECT: A change in one of the components of aggregate demand leads to a greater overall change in
national income
MULTIPLIER/ACCELERATOR MODEL: A model, which describes how the interaction of the accelerator theory and
multiplier effect lead to changes in national income
Potential and actual growth
The trend growth rate and economic cycle
Economic growth caused by an increase in AD
Longterm economic growth requires a rightward shift of AS\

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Defined as an increase in the real output of the whole economy. UK longterm growth rate is 2.5% a year
Measured by a change in real GDP per capita ­ represents value of all income or expenditure or output generated in the
UK economy in a year, adjusted for inflation and size of population.
Level of real output may increase each year, level will be within economy's full employment potential level of output.…read more

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Rise in material standard of living
Enables a country to reduce/remove absolute poverty
Raises tax revenue without raising taxes, some can be used to finance schemes for poor
Tax revenue can be used to provide public services and merit goods, also to correct negative externalities
Opportunity cost of operating on PPB, in short run fewer consumer goods will be produced.…read more

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MEASURE OF DOMESTIC PROGRESS: Published by new economics foundation ­ reflection of how closely GDP
reflects progress of quality of life in Britain. Factors in social and environmental costs of growth and benefits of unpaid
work. UK GDP has increased 80% over 3 decades but social costs have increased and spiralling costs of crime and
negative impact of family breakdown.
MISERY INDEX: Adding unemployment rate to inflation rate ­ higher level of economic and social costs.…read more

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Outside Shocks: Are exogenous from outside our economy ­ affect AD and supply socks affecting AS. May bring both
demand side and supply side shocks e.g. storm damage caused by hurricane activity has led to reduced demand in
southern US states and affect supply of rude oil, raising price and raising production costs across many economic
Multiplier/Accelerator Model: Caused by interaction of two processes multiplier and accelerator. Accelerator theory of
investment ­ is determined by past changes in income.…read more



This is 6 pages which cover all aspects of economic growth up to AS standard. Includes measurement, causes, problems etc.

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