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ECONOMICS MODULE 2 KEYWORDS
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2.1- The
Measurement of
Macroeconomic
Performance
Macro-economics The management of the whole economy.
These are the aims or goals of government policy, used to evaluate the
performance of the UK economy. They can be demand side (AD); stable low
Macro-economic inflation, sustainable economic growth, high…

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ECONOMICS MODULE 2 KEYWORDS
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Sustainable economic A macroeconomic objective on the demand side, measured by the rate of
growth growth of real gross domestic product. The sustainable target growth rate
is between 2.5% and 2.75%.
Nominal GDP/ output/ The monetary value of the output produced within a country within…

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ECONOMICS MODULE 2 KEYWORDS
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Trend / Long Run This is the expected rate of potential growth.
Growth /Natural Rate
Output Gap This is the difference between actual and potential output.

Positive Output Gap This is when the actual output is greater than potential growth, actual
growth is more than…

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ECONOMICS MODULE 2 KEYWORDS
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2.2 ­ How the
Macro-economy
works: AD/ AS
analysis, the
Circular Flow of
Income and
related concepts
Circular Flow of Income This is the flows of money between firms and households, the main
components are consumption (C) and income (Y). It is circular because:
the…

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ECONOMICS MODULE 2 KEYWORDS
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out. It is negative when the market value is less than the outstanding
mortgage so consumption decreases and AD shifts in.
MEW ­ Mortgage When homeowners with positive equity borrow more money from
Equity their bank, a re-mortgage, to fund spending on home improvements
Withdrawal…

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ECONOMICS MODULE 2 KEYWORDS
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Determinants of AD- Income levels at home and abroad. (imports into UK are YED elastic
exports ­more than 1% are demanded for a 1% in income) Price and quality
competitiveness of goods. Exchange Rate.
Net Balance UK exports earn revenue abroad which is a credit…

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ECONOMICS MODULE 2 KEYWORDS
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The multiplier An injection into the circular flow which will increase real GDP
proportionally more. OR when an increase or decrease in AD spending
leads to a larger than proportional change in the national income.
It can be positive (expansionary) when there is an increase…

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ECONOMICS MODULE 2 KEYWORDS
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2.3- Economic
Performance
Macroeconomic Aims or goals of govt policy, used to evaluate performance of UK
Objectives economy.

Demand side (to target AD)
Stable low inflation at CPI target rate of 2%.
Sustainable economic growth ­ real GDP at 2.75% per year.
High employment ­…

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ECONOMICS MODULE 2 KEYWORDS
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Unemployment Unemployment is the number of people of working age 16-65 who do not
currently have a job but are actively seeking work and willing to work at
existing wage rates. Full employment is a macro objective. Even though
these people do not currently have…

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ECONOMICS MODULE 2 KEYWORDS
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abi

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Hi - have you completed this now by any chance beyond section 3? Very helpful! Thank you :) 

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