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Key Economic Terms

Economic Term Definition
Accelerator effect The relationship 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
planned supply for a variety of reasons such as breakdowns in
production, staff…

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Contractionary fiscal Increasing levels of tax revenue relative to government spending,
policy appropriate during a boom in economic activity
Contractions in A fall in the quantity demanded caused by rises in prices
demand
Cost push inflation Where increased costs of production result in firms increasing their
prices leading to an…

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Economic indicators Economic statistics that provide information about the expansions
and contractions of business cycles
Economic models These are used to show the essential characteristics of complicated
economic conditions in order to analyse them and predict the result
of changes of variables
Economic welfare Refers to the benefit or satisfaction…

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Free-rider problem Where some consumers benefit from other consumers purchasing
a good, particularly in the case of public goods
Frictional/search People between jobs
unemployment
GDP per capita GDP divided by the population ­ a measure of living standards
Geographical Where workers find it difficult to move to where employment
immobility…

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Joint supply When the production of one good also results in the production of
another
Keynesian The view of John Maynard Keynes, a very influential UK economist
(1883 ­ 1946) who suggested how governments could cure mass
unemployment
Labour market An example of a factor market, in this case where…

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Negative Costs imposed on 3rd party not involved with the consumption or
externalities production of the good
Negative output gap Where the economy is producing less than its trend output
Net government The difference between government spending and taxation
spending
Nominal GDP/nominal GDP/income/output figures not adjusted for inflation
national
income/nominal…

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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
Profit When total income already knew for a firm is greater than total
costs
Public good A good possesses the characteristics of non-excludability and
non-rivalry…

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Supply-side policies A range of measures designed to increase aggregate supply and
hence the potential output of the economy, though many
improvements may come from the private sector
Supply-side shock Something that'll increase or reduce the costs, hence supply-side
of all firms in the economy, e.g. a large increase in…

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