4.1 - 6.5

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Factors of production
resources comprising land (including natural resources), labour, capital and enterprise. They are needed to produce output.
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Economic growth
growth in output of the economy over time - a growth of real GDP over time.
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Gross domestic product (GDP)
the total value of goods and services produced in the country in a year
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GDP per capita
GDP divided by the total population, therefore GDP per head.
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Full employment
when all those able and willing to work are in paid employment at the current wage rate.
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When workers who are able and willing to work are unable to find employment at current wage rates.
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Claimant count
measures unemployment according to the number of people claiming unemployment-related benefits e.g. Jobseeker's Allowance (JSA)
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Labour Force Survey
a survey of sample of households, counting people as unemployed if they are actively seeking work but do not have a job (in the week of the survey).
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a sustained rise in the general price level over time
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Price stability
the general level of prices is kept constant or grows at an acceptably low rate over time.
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Rate of inflation
the rate at which the general price level rises over time
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Consumer Prices Index (CPI)
official measure of the rate of inflation for the UK and governments of other EU countries.
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Monetary inflation
inflation caused by growth in the economy's money supply
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Demand-pull inflation
inflation caused by excess demand in the economy
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Cost-push inflation
inflation caused by a rise in costs in the economy
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a rate of inflation so high that the value of money becomes close to worthless
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a compulsory payment to the government
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Direct tax
a tax on income or wealth
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Indirect tax
a tax on spending, often defined as a tax on goods and services
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Income tax
Collects more revenue than any other and is paid by the employed on their wages and salaries
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National insurance contributions (NICs)
These contributions are paid by both employees and employers. Effect is similar to that of income a tax - a deduction from wages
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Corporation tax
A tax on the profits of companies
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Inheritance tax
A tax on the transfer of wealth at the time of death
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Value-added tax (VAT)
A tax on a wide range of goods and services
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Excise duties
Taxes on a specific range of goods, in particular tobacco products, alcoholic drinks, petrol and diesel have high excise duties. These are all inelastic goods.
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External cost
the negative impact of an economic transaction on a party who is not directly involved e.g. manufacturing that causes air pollution has costs for the whole population.
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Positive/negative externalities
A negative impact is an external cost or negative externality and a positive impact is an external benefit or positive externality. Demerit goods give rise to negative externalities and merit goods give rise to positive externalities.
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Demerit good
A good or service whose consumption is considered unhealthy or undesirable due to its bad effects on consumers. It is over-consumed if left to market forces. Examples are tobacco, alcohol, junk food etc.
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Distribution of income
how incomes are shared out among the people of the country
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Redistribution of income
a policy to reduce the inequalities of income, so that incomes are distributed more evenly
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Inequalities of income
incomes are distributed unevenly so some people have a much higher income than others
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Transfer payments
benefits to citizens which are paid out of tax revenue (of the government)
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Regressive tax
a tax which takes a greater proportion of income from lower incomes, or takes a smaller percentage of a higher income
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Proportional tax
a tax which takes the same proportion of income from all income levels
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Progressive tax
a tax which takes a greater proportion of income from higher incomes, or takes a smaller percentage of a lower income
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Market failure
when the market (through demand and supply) fails to allocate resources in the best interests of society as a whole
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Fiscal policy
a policy that uses taxation and government spending to try to achieve the objectives of the government
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Objectives of the government
The four main macro-economic objectives of the government - maintaining full employment, economic growth, price stability and the balance of imports and exports
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Balanced budget
government spending is equal to tax revenue
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Budget deficit
government spending is greater than tax revenue
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Budget surplus
tax revenue is greater than government spending
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Multiplier effect
a process by which an original change in incomes in the economy leads to a total change in incomes which is a multiple of the original change
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anything that is generally acceptable as a medium of exchange
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Banks and building societies
financial institutions that accept deposits and make loans
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Interest rate
the reward for saving and the cost of borrowing
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Monetary policy
a policy aimed at affecting the total supply of money in the economy
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Interest rate policy
the use of interest rates to try to achieve the government's economic objectives
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Bank rate
the interest rate set by the Bank of England, which affects all interest rates in the economy (also called the base rate)
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Supply-side policies
policies that increase the ability of the economy to supply more goods and services
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Other cards in this set

Card 2


Economic growth


growth in output of the economy over time - a growth of real GDP over time.

Card 3


Gross domestic product (GDP)


Preview of the front of card 3

Card 4


GDP per capita


Preview of the front of card 4

Card 5


Full employment


Preview of the front of card 5
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