economics

accelerator effect

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

1 of 180

actual supply

the amount that producers in fact produce. This can differ from planned supply as there can be breakdowns in production

2 of 180

aggregate demand

total planned expenditure in the economy. Formula is C +I +G + (x-m

3 of 180

Aggregate supply

the total value of goods and services supplied in the economy

4 of 180

Allocative efficiency

this is achieved in an economy when it is not possible to make anyone better without making someone worse off or you cannot produce more of one good without making less of another

5 of 180

Balance of Payments

Exports minus imports. A deficit meaning more is imported than exported.

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Balance of trade

visible exports minus visible imports

7 of 180

Balanced budget

where government revenue equal government spending in a financial year

8 of 180

boom/bust policy

the government using macroeconomic tools to stimulate and then contract the economy

9 of 180

Broad Money

money that is held in banks and building societies but isn't immediately accessible. It includes more than just physical money.

10 of 180

Budget deficit

where government spending exceeds government revenue in a finacial year

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budget surplus

where government revenue exceeds government spending in a finacial year

12 of 180

buffer stock

an intervention system that aims to stop to limit the fluctuations of the price of a commodity

13 of 180

capital spending

government spending to improve the productive capacity of the nation, including infrastructer, schools and hospitals

14 of 180

central bank

the financial instituation in a country responsible for issuing notes, coins and setting the short term interest rates

15 of 180

classical view

economists who believed that recessions and slumps would cure themselves

16 of 180

commodity

a good that is traded, usually referring to raw materials or semi-manufactured goods that are traded in bulk such as tea or wheat. Normally unbranded goods.

17 of 180

competition

a market situation in which there are a large number of buyers and sellers

18 of 180

complementary products

goods that are consumed together for example bread and butter

19 of 180

complete market failure

where the free market fails to provide a product at all like a public good

20 of 180

composite demand

a good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the available supply for the other purpose leading to higher prices. e.g milk used in butter and cheese.

21 of 180

contraction in supply

when the amount offered for sale is reduced because the price level has fallen

22 of 180

contractionary fiscal policy

increasing levels of tax revenue relative to government spending, appropriate during a boom in economic activity.

23 of 180

contraction in demand

falls in the quantity demanded caused by rises in prices

24 of 180

cost push inflation

where increased costs of production results in firms increasing their prices leading to an increase in the general price level

25 of 180

credit crunch

where borrowing becomes more expensive or unavailable

26 of 180

current account equilibrium

where the current account exercises no effect on the domestic macroeconomy

27 of 180

current spending

government spending on the day to day running of the public sector including raw materials and wages of public sector workers

28 of 180

cyclical unemployment

demand deficient unemployment that occurs as a result of the economic cycle

29 of 180

deflation

a situation where prices persistently fall

30 of 180

deindustralisation

a fall in the proportion of national output accounted for by the manufacturing sector of the economy

31 of 180

demand

the amount that consumers are willing and able to buy at each given price level per unit

32 of 180

demand deficient unemployment

insufficient aggregate demand in the economy to employ the available labour

33 of 180

demand pull inflation

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

34 of 180

demand side fiscal policy

change in the level or structure of government spending and taxation aimed at influencing one or more of the components of aggregate demand

35 of 180

demerit good

a good that would be over-consumed in a free market as it brings less overall benefit to consumers than they realise. It is over-consumed and normally has negative externalities

36 of 180

deregulation

the process of removing government controls from markets.

37 of 180

derived demand

when the demand for one good or service comes from the demand for another good or service. the demand for cars stimulate the demand for steel. Steel is derived demand

38 of 180

discouraged workers

workers who leave the market because despite many attempts they are unable to find a job

39 of 180

discretionary fiscal policy

the deliberate manipulation of government spending and taxation to influence the economy.

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diseconomies of scale

where an increase in the scale of production leads to increases in average total costs for firms

41 of 180

disequilibrium

a situation within the market where supply does not equal demand

42 of 180

disposable income

income available to households after the payment of income tax and national insurance

43 of 180

division of labour

breaking the production process down into a sequence of tasks, with workers assigned to particular tasks

44 of 180

Economic goods

goods that are scarce and have an opportunity cost

45 of 180

economic growth

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

46 of 180

economic indicators

economic statistics that provide information about the expansions and contractions in business cycles

47 of 180

economic models

these are used to show the essential characteristics of complicated economic conditions in order to analyse them and predict the result of changes of variables

48 of 180

economic welfare

refers to the satisfaction an individual or society gets from the allocaion of resources. this may involve the standard of living for example

49 of 180

economies of scale

where an increase in the scale of production leads to reductions in average total cost for firms

50 of 180

effective demand

demand supported by the ability or real purchasing power to pay for a good or service

51 of 180

employment

where labour is actively engaged in a productive activity usually in exchange for payments such as wages

52 of 180

equilibrium

the price at which supply is equal to demand and there is no tendency to change

53 of 180

ex ante

a term that refers to future events

54 of 180

ex post

a term that refers to after the event

55 of 180

excess demand

when demand is greater than supply at a given price

56 of 180

excess supply

when supply is greater than demand at a given price signalling to producers to lower prices

57 of 180

exchange rate

the price at which one currency exchanges for another eg the US dollar and the UK pound

58 of 180

expansionary fiscal policy

increasing levels of government spending relative to tax revenue, appropiate to stimulating aggregate demand during a downturn in economic activity.

59 of 180

exporting

the sale of goods or services to a foreign country. It generates income for the home country

60 of 180

exports

goods or services sold abroad

61 of 180

extension in supply

when there is an increase in supply because the market price has risen

62 of 180

extensions in demand

increases in demand caused by a fall in price

63 of 180

externalities

costs or benefits that spill over to third parties external to a market transaction

64 of 180

factor market

the market for the factors of production that make other goods and services such as labour

65 of 180

information failure

when consumers don't understand the full benefits or disadvantages of a transaction

66 of 180

fiscal policy

the policy of the government regarding taxation and government expenditure

67 of 180

fixed costs

when cost of production don't vary as output changes

68 of 180

flow

measured over a specificed period of time

69 of 180

free goods

goods that have no opportunity cost, eg air

70 of 180

free market economy

when there is a very limiited government involvement in providing goods and services. Only job is to ensure the market rules are fair.

71 of 180

Free rider problem

where some consumers benefit from other consumers purchasing a good, particularly in the case of a public good with parking tickets.

72 of 180

Frictional/search unemployment

people between jobs

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GDP per capita

GDP divided by the population - a measure of living standards

74 of 180

geographical immobility

when workers find it difficult to move to where employment is due to family ties or due to differences in housing costs

75 of 180

globalisation

the ability to produce and sell in any country in the world

76 of 180

goods and services

goods are tangible products such as cd whereas services are not tangible like a train journey

77 of 180

government failure

when government intervention to correct market failure does not improve the allocation of resources or leads to a worsening of the situation. The costs of government intervention exceeds the benefits

78 of 180

gross domestic product

the total value of goods and services produced in the economy

79 of 180

hot money

money that is available to rapid tranfser from country to another

80 of 180

human capital

the skills, motivation, and knowledge of labour. Improvements of human capital improve productivity and shift ppb to the right

81 of 180

importing

the purchase of goods and services from foreign countries. Leads to expenditure for the home country

82 of 180

imports

goods or services purchased abroad

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incidence of tax

the proportion of a tax that is passed onto the consumer

84 of 180

income

the flow of earnings to a factor of production over a period of time eg wages

85 of 180

income elasticity of demand

proportion to which demand changes when there is a change in income. Formula is percentage change of quantity demanded divided by percentage change of income

86 of 180

income induced

will increase as income increases and decrease as income decreases

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index numbers

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

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indirect tax

a tax on spending

89 of 180

inferior goods

goods or services that see a fall in demand when incomes rise

90 of 180

inflation

a persistent increase in the level of prices

91 of 180

inflationary pressure

occurrences that are likely to lead to increased prices

92 of 180

injections

money that orgiinates outside the circular flow and so will increase national income/output/expenditure

93 of 180

interest rate

the cost of borrowing or the reward for saving

94 of 180

investment

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

95 of 180

investment good

a product that will increase in value over time

96 of 180

invisibles

intangibles such as the provision of insurance or banking services

97 of 180

joint supply

when the production of one good also results in the production of another

98 of 180

keynesian

John Maynard Keynes suggested how governments could cure mass unemploymeny

99 of 180

labour market

an example of a factor market, where labour is bought and sold

100 of 180

law of unintended consequences

when the actions of consumers, producers and governments have effects that are unanticipated

101 of 180

long run aggregate supply

the economy's productive capacity

102 of 180

marginal external benefit

the spillover benefit to third parties of an economic transaction

103 of 180

marginal external cost

the spillover cost to third parties of an economic transactopm

104 of 180

marginal private benefit

the benefit to an individual or firm of an economic transaction

105 of 180

marginal private cost

the cost to an individual or firm of an economic transaction

106 of 180

marginal social benefit

the full benefit to society of an economic transaction, including private and external benefits

107 of 180

marginal social cost

the full cost to society of an economic transaction, including private and external costs

108 of 180

market clearing price

the price at which all goods that are supplied will be demanded

109 of 180

market demand

total demand in a market for a good, the sum of all individuals' demand at each given price

110 of 180

market failure

when there is a misallocation of resources and the market fails to produce what consumers need at the lowest possible cost

111 of 180

maximum price

a price ceiling which the price of a good or service cannot be above

112 of 180

merit good

a good that would be under-consumed in a free market as consumers suffer from information failure

113 of 180

minimum price

a price floor which the price of a good or service cannot be under

114 of 180

monetary policy

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

115 of 180

money supply

the total amount of money in an economy

116 of 180

monopoly

a market structure dominated by a single seller of a good

117 of 180

multiplier effect

where an increase or decrease in spending leads to a larger than proportionate change in the national income

118 of 180

narrow money

notes, coins and balances available for normal transactions

119 of 180

negative expectations

businesses expect future sales and profits to be less due to factors like falling aggregate demand

120 of 180

negative externalities

costs imposed on a third party external to the market transaction of a good

121 of 180

negative output gap

where the economy is producing less than its trend output

122 of 180

normal goods

goods or services that will see an increase in demand when incomes rise

123 of 180

net government spending

the difference between government spending and taxation

124 of 180

nominal GDP/nominal national income/nominal output

GDP/income/output figures not adjusted for inflation

125 of 180

normative statements

opinions that require value judgements to be made

126 of 180

occupational immobility

as patterns of demand and employment change, workers find it difficult to easily secure new jobs since they could lack the necessary skills

127 of 180

oppurtunity cost

the next best alternative forgone when an economic decision is made/

128 of 180

partial market failure

where the free market provides a product but with a misallocation of resources

129 of 180

participation rates

proportion of the country's population that makes up the country's labour force

130 of 180

planned supply

the amount producers plan to produce at each given price

131 of 180

policy instrument

techniques used to achieve policy objectives

132 of 180

policy objective

government's major macroeconomic objectives

133 of 180

pollution permit

a permit sold to firms by the government, allowing them to pollute up to a certain limit

134 of 180

positive expectations

businesses expect the future sales and profits to improve due to factors like increased aggregate demand

135 of 180

positive externality

a positive spillover effect to third parties of a market transaction

136 of 180

positive output gap

when actual GDP exceeds trend GDP increasing inflationary pressure

137 of 180

positive statements

statements that can be tested against real world data

138 of 180

price ceiling

maximum price

139 of 180

price elasticity of demand

the responsiveness of demand to a change in the price level. The formula is percentage change in quantity demanded divided by percentage change in price

140 of 180

price floor

minimum price

141 of 180

private good

a good that is both excludable and rival in consumption

142 of 180

privatisation

sale of government owned assets to the private sector

143 of 180

product markets

markets where all kinds of goods and services are traded, eg mobile phone markets

144 of 180

production

the process that converts factor inputs into outputs of goods and services

145 of 180

production of possibility boundary

the PPB indicates the maximum possible output that can be achieved given a fixed set of resources and technology

146 of 180

productive efficiency

when a firm operates at minimum average total cost, producing the maximum possible output from inputs into the production process

147 of 180

productivity

a measure of efficiency, measuring the ratio of inputs to outputs

148 of 180

profit

when total income exceeds total costs

149 of 180

public good

a good that has characteristics of non-rivalry and non-excludability in consumption

150 of 180

quasi-public good

a good that has some of the qualities of a public good but does not fully possess the two required characteristics of non-rivalry and non-excludability

151 of 180

real GDP/real national income/real output

GDP/income/output figures adjusted for inflation

152 of 180

real interest rate

the money rate of interest minus the rate of inflation

153 of 180

recession

recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP)

154 of 180

renewable resources

resources that are able to be replenished whereas non renewable resources such as oil are likely to run out

155 of 180

savings

a withdrawal from the circular flow

156 of 180

specialisation

the production of a limited range of goods by an individual factor of production or firm or country, in cooperation with others so that together a complete range of goods is produced

157 of 180

stock

a quantity measured at a particular point in time

158 of 180

structural unemployment

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

159 of 180

subsidies

payments by government to producers encouraging them to produce a good or service

160 of 180

substitutes

goods that can be used as alternatives to another good. E.g pepsi is a substitute for coke

161 of 180

supply

the amount offered for sale at each given price level

162 of 180

supply side fiscal policy

changes in the level or structure of government spending and taxation designed to improve the supply side of the economy

163 of 180

supply side shock

something that will increase or reduce the costs

164 of 180

sustainable

an activity carried out today that does not stop future generations maximising their welfare

165 of 180

tight labour market

where firms have to increase wages to attract the labour that they require

166 of 180

total factor productiviity

the overall productivity of inputs used by a firm in producing a particular level of output

167 of 180

trade union

an organisation of workers set up to negotiate on wages, working hours and working conditions with employers on behalf of its members

168 of 180

trade off

where one macroeconomic objective has to be restricted in favour of another objective

169 of 180

transfer payments

government payments to individuals for which no service is given in return eg state benefits

170 of 180

transmission mechanism of monetory policy

how changes in the base interest rate influence the components of aggregate demand

171 of 180

unemployment

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

172 of 180

unemployment trap

where individuals receive more in benefit payments than they would be paid if they were in a job

173 of 180

value judgements

statements or opinions expressed that are not testable or cannot be verified and depend on an inidividual views

174 of 180

variable costs

costs of production that vary with output

175 of 180

visibles

exports or imports that are tangible, that you can see and touch as it crosses international boundaries

176 of 180

voluntary unemployment

workers who are not prepared to take a job at current wage levels

177 of 180

wealth

a stock of owned assets, eg housing property

178 of 180

withdrawals

any money not passed on in the circular flow and has the effect of reducing national income

179 of 180

weighting

where a commodity is given a weighting proportional to its importance in the pattern of consumer spending

180 of 180

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