Economics Unit 2 Definitions.

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Factors Of Production
Resources comprising Land (including natural resources), Labour, Capital and Enterprise.
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Full Employment
Everyone who is able and willing to work has a job.
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Economic Growth
Growth of output in the economy over time. The value of output will be equal to the value of incomes for the workers and owners of factors of production which produce that output. A growth of real GDP 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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Inflation
A sustained rise in general price leves over time.
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Fiscal Policy
Policy aimed at changing the level of total demand in the economy through change in taxation and the government's own spending
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Interest Rate Policy
Policy aimed at changing the level of total demand in the economy through changes in interest rates. The policy is operated by the Bank of England.
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Supply-Side Policy
Policies aimed to increase the economy's capacity to produce more goods and services. These policies help the Government to achieve all four of its macro-economic objectives.
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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 whole population. (Capita per head)
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Unemployment
When workers who are able and willing to work are unable to find a job at current wage rates.
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Claimant Count
Measures unemployment according to the number of people claiming unemployment-related benefits (such as JSA)
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Labour Force Survey
A survey of a sample of households, counting people as unemployed if they are actively seeking work but do not have a job.
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Voluntary Unemployment
People choosing not to work.
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Seasonal Unemployment
Seasonal workers not being employed at other times of the year.
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Frictional Unemployment
Caused by workers moving between jobs. (The time between someone leaving their old job and starting their new job)
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Structural Unemployment
Caused by long-term changes in the structure of the industry. E.g If
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Technological Unemployment
Caused by capital taking the place of labour. Manufacturing jobs fell due to lots of labour being replaced by machinery. More recently, the increase in internet banking has reduced the need for bank workers in local branches.
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Cyclical Unemplyment
Caused by a fall in total demand in the economy. If demand for goods and services fall, then fewer workers are needed to produce the output and workers will be laid off.
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Rate Of Inflation
The rate at which the general price level rises over time.
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Consumer Price Index
The official measure of the rate of inflation.
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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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Hyperinflation
A rate of inflation so high that the value of money becomes close to worthless.
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Tax
A compulsory payment to the government. Used to fund government projects.
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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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Corporation Tax
A tax on the profits of companies.
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Excise Duties
Taxes on specific goods such as petrol, cigarettes and alcohol.
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External Cost (Negative Externality)
The negative impact of an economic transaction on a party who is not directly involved in the transaction. E.g, pollution emitted from factories has an impact on local inhabitants and the environment.
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Positive Externality
The positive impact of an economic transaction on a party who is not directly involved in the transaction. E.g, people benefit from others having had injections to prevent the spread of disease.
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Demerit Good
A good or service whose consumption is considered unhealthy or undesirable due to its bad effects on the consumers. It is over-consumed if left to market forces. E.g, drugs. Demerit goods tends to lead to negative externalities.
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Distribution Of Income
How incomes are shared out among the people of the country.
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Redistrinution 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.
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Regressive Tax
Tax takes a greater proportion of income from lower incomes, or takes a smaller percentage of a higher income
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Proportional Tax
Tax takes the same proportion of income from all income levels.
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Progressive Tax
Tax takes a greater proportion of income from higher earners or takes a smaller percentage of a lower income.
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Market Failure
When the market (through demand ad supply) fails to allocate resources in the best interests of society as a whole.
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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 change.
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Money
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 cost for borrowing.
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Monetary Policy
A policy aimed at affecting the total supply of money in the economy.
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Bank Rate
The interest rate is set by the Bank Of England, which affects all interest rates in the economy. (Also called the base rate).
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Other cards in this set

Card 2

Front

Everyone who is able and willing to work has a job.

Back

Full Employment

Card 3

Front

Growth of output in the economy over time. The value of output will be equal to the value of incomes for the workers and owners of factors of production which produce that output. A growth of real GDP over time.

Back

Preview of the back of card 3

Card 4

Front

The general level of prices is kept constant or grows at an acceptably low rate over time.

Back

Preview of the back of card 4

Card 5

Front

A sustained rise in general price leves over time.

Back

Preview of the back of card 5
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