IB Economics


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Section 3 terms

GDP: The total market value of all final goods and services produced in a country in a given year.

GNP: The total value of all final goods and services produced within a nation in a particular year, including income earned by its citizens and minus the income earned by non-citizens.

Aggregate demand: The total demand of all final goods and services at a given time and at a price level.

Aggregate supply: The total supply of goods and services that firms are willing to sell at a given price in an economy.

Business (trade) cycle: A long term pattern of alternating periods of economic growth (recovery) and decline(recession).

Circular flow of income: Indicates how money moves throughout an economy between businesses and consumers.

Consumption: Using a good or service until it has no remaining value.

Cost-push inflation: Persistently rising general prices level rising due to rising input costs such as increasing wages, increasing corporate taxes and imported inflation.

Crowding out: When the government are borrowing too heavily while businesses and consumers also want to borrow.

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Section 3 terms

Deflation: A decline in general price levels, often caused by a reduction in supply of money or credit.

Deflationary gap: The amount by which the economy's aggregate demand is below employment output.

Demand pull inflation: Price increases which result from an excess of demand over supply.

Depression: A period during which business activity drops significantly.

Economic growth: A positive change in the level of production of goods and services by a country over a period of time.

Economic development: The increase in the standard of living in a nation's population with sustained growth from a simple, low-income economy to a modern, high-income economy.

Fiscal policy: Government's revenue and spending policy to (1) counter economic cycles in order to achieve lower unemplyment (2) to achieve low or no inflation and (3) acheive a sustained but controllable economic growth. 

Full employment: An economy where all eligible people who want to work can find employment at prevailing wage rates.

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Section 3 terms

Human Development Index (HDI):

Indirect taxation:


Inflationary gap:


Monetary policy:

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