Economics Key terms and definitions

The study of how society allocates it's scarce/limmitted resources to meet the needs and wants of society.

The concept: We have limited resources yet unlimited wants

measures the change in GDP over time

2 consecutive quatres of negative economic growth

(quatres of a year - 3 months)

very fast economic growth over a sustained period

the cost of borrowing and the return on savings.

The sustained increase in the general price level

The anual % change in inflation

(change in consumer prices)

The manipulation of Interest rates in order to change GDP

The manipulation of Government spending and Taxation in order to manipulate GDP

he discovered that an economy sometimes needs governmental intervention.

P-etrolium revenue (net income of north sea field)

I-ncom tax

C-o-orperation tax

N-ational...

I-insurance...

C-ontributions (paid by individuals to social secutrity)

V-AT

A-lchohol duties

T-axes on tobacco

T-ime lag- it takes time to implement an appropriate policy response. Plans are subject to a three year spending review.

I-ncome-if government spending causes the increase in D for workers, and thus wages increases, it will not make a difference unless they spend thier extra money, without thier consumption the multiplier affect will not exsist.

M-onetary polict could cancel it out- if iterest rates don't follow fiscal, than it could erase the benefit created

E-ffects

D-ebt-Fiscal  policy creates an opportunity cost

I-ndustry dependance- although money will help industries cut costs and increase output, it might not create jobs - if they are capital intensive, it may not help

S-ize of tax- it has to be substantial enough to encourage spending and hence the multiplier effect

C-onsumer confidence- regardless of income, if a consumer feels poor (negative wealth affect) they aren't going to spend. some are worried about losing thier jobs, so don't spend - regardless of the expansionary incentives

standards of living

output method

expenditure method

income method

WIDE NOSH - appologize for the acronym, please help me if you have any other suggestions! :)

W-hat is produced- if an economy A produces more capital goods (aid for manufacturing) than economy B which focuses consumer goods trends will illustrate GDP as higher for economy A in the short tun, but in the long run those capital goods will be used to produce consumer goods.

I-gnores goods which have no money value -i e barter economies

D-istribution of income is neglected. although Real GDP per capita is higher, it might have very rich individuals and a poor

E-valuating public services is difficult, may over and underestimate their value

N-egative externialities produced from economic bads

O-vertime price comparrison dates- for example, a man owns a fridge and a computer, yet now they are worth 1/20th of what he bought it in the first place, yet its not considered

S-tandards of living luxuries, holidays actually contribute to another economies wealth, and don't contribute to the circular flow diagram, but holidays illustrate good quality of life and saticefaction

H-idden economy-one of the easiest ones. The illegal black market don't declare their income, causing under estimation of GDP

The purchase of a resource (good or service) in the country

CONSUPTION +INVESTMENT+GOVERNMENT SPENDING +(EXPORTS-IMPORTS)

C+I+G+(X-M)

S - substitutes and compliments available

H - habitual good

I - proportion of incomes the good takes up ( larger proportion = more elastic)

P - peak or off peak

B - breadth of definition - e.g. elasticity is different for 'cereal' as apposed to 'kellogs cornflakes'

E - elasticity

D - degree of a neccessity or luxury. N PED=<1 L PED=>1