Module 2 Keywords (Macro)

Under the headings of the AQA AS specification, but only upto section 3.

HideShow resource information
  • Created by: Charlotte
  • Created on: 31-03-12 14:13
Preview of Module 2 Keywords (Macro)

First 423 words of the document:

ECONOMICS MODULE 2 KEYWORDS
1
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 employment, equilibrium in
objectives the balance of payments or supply side (AS); high levels of investment and
labour productivity, international obligations, rising living standards and a fall
in relative poverty, sound government finances.
Fiscal Policy The govt policy regarding taxing and expenditure.
Budget Deficit If government spending is greater than tax revenue. E.g Budget deficit for
2010-11 was £148bn.
Budget Surplus If government tax revenue is greater than expenditure.
Supply Side Fiscal Changes in the level or structure of government spending and taxation
Policy designed to improve the supply side of the economy through influencing
incentives to save, to supply labour, to be entrepreneurial, and to promote
investment, which are largely microeconomic in nature.
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 will increase or reduce the costs, hence supply side of all
firms in the economy. E.g. a large increase in oil prices
Demand-side Fiscal Changes in the level or structure of government spending and taxation
Policy aimed at influencing one or more of the components of aggregate
demand.
Cost of borrowing or reward for saving. Real rate of interest is interest rate
Rate of interest
minus inflation.
Inflation A sustained rise in the general price level. Stable low inflation is
macroeconomic objective on demand side; govt's inflation target is CPI 2%.
Inflation targets introduced in Oct 1992.
Deflation A sustainable fall in the general price level. A general fall in prices is deflation.
Consumer Price Index / This measure of the price level excludes council tax and mortgage
CPI payments and is used as the government's inflation target that the Bank of
England's monetary committee is required to achieve.
RPIX A measure of the price level that excludes payments to service mortgage
interest from the Retail Price Measure (which are affected by interest
rates). Was used as target measure until end of 2003.

Other pages in this set

Page 2

Preview of page 2

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
2
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 an
national income (Y) at economy within a fixed time period, usually a year. Nominal GDP is not
the current prices adjusted for inflation occurred over the time period. E.g. UK GDP is £1.3
trillion.…read more

Page 3

Preview of page 3

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
3
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 trend growth. When actual GDP is above the
productive potential of the economy and the economy is operating outside
its temp ppc. Real GDP is high. Inflation. U/e is low.…read more

Page 4

Preview of page 4

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
4
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).…read more

Page 5

Preview of page 5

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
5
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 etc. PDY .
Determinants of AD ­ 1. Private sector firms ­ 1. Interest rates 2. Amount of spare
investment changes capacity a firm has. Business confidence. Expected income
levels. Availability of credit.…read more

Page 6

Preview of page 6

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
6
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 and an injection into
the circular flow whereas imports into the UK are a debit and a
withdrawal from the circular flow (normally a withdrawal).
Saving Saving is current spending / consumption postponed.…read more

Page 7

Preview of page 7

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
7
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 in AD
spending which results in real GDP increasing proportionally more than
the initial increase.…read more

Page 8

Preview of page 8

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
8
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 ­ govt wants to achieve full employment.
Equilibrium in the balance of payments ­ imports = exports.…read more

Page 9

Preview of page 9

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
9
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 a job, they are still classified as
economically activity because they are looking for work and willing to take a
job at the wage rate offered.…read more

Page 10

Preview of page 10

Here's a taster:

ECONOMICS MODULE 2 KEYWORDS
10…read more

Comments

abi

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

Similar Economics resources:

See all Economics resources »See all resources »