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KEY TERMS

Economic growth - is an increase in the economy's potential level
of real output and an outward shift of the economy's PPF

Unemployment - a situation where people are out of work but are
willing
and able to work.

Inflation - a sustained rise in the price…

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Recession-is a fall in real output for 6 months or more

Consumption ­The total planned spending by household
on real output produced within the economy

Saving ­Income which is not spent

Wealth ­ A stock of assets or things that have value which
people own. E.g. your house is…

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Investment
Government spending
Imports and exports

Consumer expenditure ­
real disposable income, this is the main influence on
consumer expenditure
Wealth, the more people have (savings and shares) the more they tend to spend
Consumer confidence, how optimistic consumers are about future economic prospects.

Investment ­
Investment Is defined…

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Aggregate Supply (AS)
Shifts in AS:
Short run (SRAS) Long run (LRAS)
Changes in the costs of production Changes in the quantity and quality
of resources
Changes in the costs of raw materials Improvements in education and
training
Change in wages Advance in technology
Changes to producer taxes

The…

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High employment and low unemployment.
Full employment, a situation where those wanting and able to work
can find employment at the going wage rate.
Having a higher proportion of economically active people should raise
the productive potential of the economy and reduce the cost of
state benefits.
Inflation:
Low…

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The only way it can increase its output is to switch resources from making
consumer goods to making capital goods.
If economic growth is achieved in a way that is not sustainable, without
regard to controls on pollution, there will be damage to the environment.
There is also risk…

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Another difficulty of the claimant count is that it is not suitable for
international comparisons.

The causes of unemployment:
Cyclical unemployment, unemployment arising from a lack of AD.
Unemployment can also arise due to problems with the supply labour.
Structural unemployment, unemployment caused by the decline of certain
industries…

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Inflation
A sustained rise in price level; the percentage increase in the price level over a period of time.

Measuring inflation:
Consumer price index (CPI), a measure of changes in the price of a
representative basket of consumer goods and services.
Retail price index (RPI), measure of inflation that…

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Uncertainty, if firms are uncertain about what their costs will be and what
prices they will receive from selling their products, they may be reluctant to
invest.

The benefits of inflation:
Workers also like rises in their pay, even if these are matched by higher
prices.
The ability that…

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Net errors and omissions, is added to ensure that the balance of payments
does balance.

The causes of a deficit on the current account:
A deficit on the current occurs when the country's expenditure abroad
exceeds its revenue from abroad.
Main reasons why these happen, (1) because the country's…

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