Macroeconomics Definitions

All the definitions required for unit 2, macroeconomics- AQA

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  • Created by: megan
  • Created on: 18-05-12 11:30


Accelerator effect: the relation between the change in new investment and the rate of change of national income

aggregate demand: total planned expenditure in the economy, c+i+g+x-m= AD

aggregate supple:the total value of goods and services supplied in the economy

balance of payments: exports minus imports (a deficit= import>exports)

budget deficit: government spending> government taxation

budget surplus: government taxation< government spending

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capital spending: government spending to improve the prodctive capacity

central bank: the financial institution in a contry responsible for issuing notes and coins and setting short term interest rates

 contractionary fiscal policy: increasing levels of tax revenue relative to government spending (appropriate during a boom)

 cost push inflation: where increased costs of production result in firms increasin their prices leading to an increase in the general price level

cpi: a measure of the price level similar to the hicp used widely in the eurozone.  used as a target measure for inflation by the government

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current acount equilibrium: where the current account exercises no effect on the domestic macroeconomy

cyclical unemployment: caused by a lack of demand, occures as a result of the economic cycle

deflation: a situation where prices persistently fall 

demand pull inflation: where aggregate demand exceeds aggregate supply leading to an increase in the level of prices

demand side fiscal policy: changes in the level or structure of government spending and taxation aimed at influencing one of more of the components of aggregate deman.

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disposable income: income available to households after the payment of income tax and national insurance contribution.

economic growth:the capacity of the economy to produce more goods and services over time 

economic welfare: refers to the benefit or satusfaction an individual or society gets from the allocation of resources 

employment: where labour is actively engaged in a productive activity sually in excahne for payments such as wages

exchange rate:the price at which one currency exchanges for another

exports:goods of services sold abroad

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fiscal policy:the policy of the government regarding taxation and government expenditure

gross domestic product: the total value of oods and services produced in the economy

hot money:money that liable to rapid transfer fromone country to another

imports: goods and services purchased from abroad

index numbers:a weighted average of a group of items compared to a given base value of 100

injections: money that originates outside the circular flow and so will increase national income

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interest rate: the cost of borrowing or the reward for saving

investment:spending by firms on buildings,machinery and improving the skills of the labour force

long run aggregate supply:the economys productive capacity

monetary policy:controlling the macroeconomy via changes in monetary variables such as the money supply or interest rates

multiplier effect:where an increase or decrease in spending leads to a larger than proportinatechange in the national income

negative output gap:where the economy is producing less than its trend output

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privatisation:sale of government owned assets to the private sector

production possibility boundary: indicates the maximum possible output that can be achieved given a fixed set of resources and technology in a particular time period.

real gdp:gdp adjested for inflation

recession:when an economy is growing at less than its long term trend rate of growth

savings:a withdrawal from circular flow

structural unemployment:caused by a change in the demand side or supply side of the economy

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supply side fiscal policy: changes in the level or structure of government spending and taxation designed to improve the supply side of the economy through influencing incentives to save, to supply labout, to be entrepeneurial and to promote investment which are largely microeconomic in nature

Unemployment: those without a job but who are seeking work at current wage rates.

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