Economics Unit 2

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International Unemployment
People out of work due to firms replacing domestic workers with workers from overseas, usually because they are cheaper.
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Regional Unemployment
People out of work due to a decline of certain industry in a particular area.
2 of 106
Frictional Unempolyment
Short-term unemployment where people in the labour force are between jobs.
3 of 106
Search Unemployment
People out of work who do not take the first job offered to them but spend time searching around for what they consider to be a good job.
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Casual Unemployment
People out of work in-between irregular periods of employment, eg. actors of supply teachers.
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Wage-Price Spiral
Workers ask for a pay rise in line with inflation to maintain their real purchasing power creating higher costs for firms who may pass them on sd higer prices meaning workers ask for higher pay rises, again creating even more inflation.
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Inflationary Noise
The distortion of price signals caused by inflation. Market prices do not signal the relative scarcity of products efficiently creating uncertainty for consumers.
7 of 106
GDP
The total output of goods and services produced in a country irrespective of ownership.
8 of 106
Nominal GDP
Total output produced in an economy measured in current prices and so not adjusted to inflation.
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Real GDP
Total output produced in an economy measured in constant prices and so adjusted for inflation.
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GNP
Total output of good and services produced by citizens of a country, irrespective of location.
11 of 106
Economic Growth
In the short run, an increase in GDP, and in the long run, an increase in the productive capacity of an economy.
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Economic Growth Rate
% increase in real GDP over a given period of time.
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Informal Economy
Economic activity that is not recorded or registered with the authorities in order to avoid paying tax or because the activity is illegal.
14 of 106
Sustainable Economic Growth
An increase in real GDP that can continue over time and does not endanger future generations' ability to expand productive capactiy.
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Trend Growth
The expected increase in potential output over time. A measure of how fast the economy can grow without generating inflation.
16 of 106
Economic/business Cycle
The tendancy for economic activity to fluctuate outside its trend growth rate, moving from a high level of economic activity (boom) to negative economic growth (recession).
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Boom
High level of economic growth that causes inflation.
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Recession
Two consecutive quarters of negative economic growth.
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Economic Recovery
When an economy's real GDP begins to rise after a period of negative economic growth (recession).
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Balance of Payments
A record of all money flowing in and out of a country.
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Current Account
Part of the balance of payments which consists of trade in goods, trade in services, investment income and net transfers.
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Imports
Spending on goods and services from abroad.
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Exports
Domestic goods and services bought by consumers abroad.
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Balance of Trade
Exports minus imports of goods and services.
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Trade Deficit
The value of imported goods and services exceeds the value of exported goods and services.
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Trade Surplus
The value of exported goods and services exceeds the valuse of imported goods and services.
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Trade Balance
The value of imported goods and services equal the value of exported goods and services.
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Current Account Surplus
When more money is entering the economy than is leaving it, as a result of its exports, income and current transfers from abroad being more than imports, income and current transfers going abroad.
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Current Account Deficit
When more money is leaving the country than entering it, as a result of its exports, income and current transfers form abroad being less than imports, income and current transfers going abroad.
30 of 106
Exchange Rate
Price of one currency in terms of another, e.g. $1.5 to £1.
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Appreciation of the £
Rise in the price of one currency in terms of another.
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Depreciation of the £
Fall in the price of one currency in terms of another.
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Aggregate Demand
The total demand for a country's goods and services at a given price level and in a given time period.
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Consumption
Spending by households on consumer goods, e.g. car.
35 of 106
Investment
Spending by firms on capital gooda, e.g. a machine to expand capacity.
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Government Spending
Spending by the central bank an local governement on goods and services, e.g. education.
37 of 106
Net Exports
Spending on exports minus spending on imports.
38 of 106
Aggregate Supply
Total output supplied by all domestic firms at a given price level at a given time period.
39 of 106
Macro Equilibrium
Where AD = AS
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Multiplier Effect
The process by which an change in a component of AD results in a greater final change in real GDP.
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Fiscal Policy
Use of taxation and government spending to control AD.
42 of 106
Discretionary Fiscal Policy
Deliberate changes in government spending and taxation designed to influence AD.
43 of 106
Deflationary
Policy measures designed to reduce AD.
44 of 106
Reflationary
Policy measures designed to increase AD.
45 of 106
Monetary Policy
Use of interest rates, money supply and exchange rate to conrtol AD.
46 of 106
Rate of Interest
The charge for borrowing money and the amount paid for lending money.
47 of 106
Real Interest Rate
The nominal interest rate minus the inflation rate.
48 of 106
Supply-Side Policy
Increasing the productive capacity of the economy by shifting LRAS right by raising the quantity or quality of factors of production.
49 of 106
Human Capital
Education, training and expereince that a worker, or a group of workers, posesses
50 of 106
Budget Deficit
When government spending is greater than tax revenue collected over a year.
51 of 106
Budget Surplus
When the tax revenue collected equals the government spending over a year.
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Balanced Budget
When government spending equals the tax revenue collected over a year.
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Direct Taxation
A tax levied form income or profits that cannot be avoided, e.g. income tax or corporation tax.
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Disposable Income
Income after taxes on income have been deducted and state benefits have been added.
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Indirect Tax
Tax levied on consumption of goods and services, eg. VAT.
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Corporation Tax
A direct tax on firms' profits.
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VAT
An indirect tax on the consumption of goods and services, currently at 20%.
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Progressive Tax
A tax that takes a higher percentage from the income of the rich, e.g. income tax.
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Regressive Tax
A tax that takes a greater percentage from the income of the poor, e.g. rising VAT.
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Automatic Stabilisers
Forms of government spending and taxation that change automatically to offset fluctuations in economic activity.
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Average Propensity to Consume
The proportion of disposable income spent. It is consumer expenditure divided by disposable income.
62 of 106
Average Propensity to Save
The proportion of disposable income saved. It is saving divided by disposable income.
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Saving
Real disposable income minus spending.
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Dissave
Spending more than disposable income.
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Net Savers
People who save more money than they borrow.
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Target Savers
People who save with a target figure in mind, e.g. for a car or pension.
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Savings Ratio
Savings as a proportion of disposable income.
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Free Trade
Goods can be exchanged between countries without any restrictions, such as tariffs.
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International/External Trade
The exchange of goods and services between countries.
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Protectionism
The protections of domestic industries from foreign competition aiming to reduce imports or raise exports to reduce a current account deficit.
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Protectionist Policies
Government policies to protect domestic industries form foreign competition aiming to reduce imports or raise exports to reduce a current account deficit, e.g. tariffs.
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Tariff
Tax on imports, expressed as a %.
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Quota
Physical limit on goods imported to lower imports and improve current account deficit.
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Embargo
Ban on an imported good to lower imports an improve current account deficit.
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Devaluation
The fall in the value of a currency which raises the price competitiveness of exports and lowers the price competitiveness of imports.
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Subsidy
Direct payment from the government to producers to lower costs and encourage production.
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Macroeconomic Policy Objective
A government macroeconomic goal, i.e. low unemployment, sustainable economic growth, low and stable inflation and balance of payments equilibrium, economic stability and even distribution of income.
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Macro Economy
The allocation of scarce resources across an economy as a whole.
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Circular Flow of Income
The movement of spending and income throughout the economy between households and firms.
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Household
Group of people whose spending and decisions are connected, part of the circular flow of income.
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Leakages
Withdrawals of possible spending from circular flow of income, ie. imports, taxation and saving.
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Injections
Additions of extra spending into circular flow of income, i.e. exports. government spending and investment.
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Consumer Confidence
How optimistic consumers are about future economic prospects affecting their level of spending.
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Unemployment
People who are willing and able to work but are currently out of work and actively seeking work.
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Unemployment Rate
% of labour force who are willing and able to work but are currently out of work and actively seeking work.
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Economically Inactive
People of working age who are neither employed or unemployed, e.g. university students.
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Full Employment
A situation where those wanting and able to work can find employment at the going wage rate.
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Labour Force
Number of people in an economy wha are employed AND unemployes, i.e. those wha are economically active.
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Labour Productivity
Output of goods or services per worker in a given time period.
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Claimant Count
A measure of unemployment that includes those recieving job seekers allowance, i.e. willing and able to work and actively seeking work every 4 weeks.
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Structural Unemployment
People out of work long-term due to the decline of certain industries and occupations due to changes in supply and demand, i.e. international U, technological U, regional U.
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Technological Unemployment
People out of work due to workers being replaged by more efficient or cheaper machines.
93 of 106
Seasonal Unemployment
People out of work because their labour is only demanded ath certain times of the year, e.g. Santa actor.
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Classical Unemployment
People out of work due to wage costs rising and firms not being able to afford them, i.e. trade unions bigging up wages or national minimum wage rising.
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Cyclical/Demand-Deficient Unemployment
People out of work long-term due to lack of aggregate demand in a recession.
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Hysteresis
Unemployment causing unemployment as the longer people are out of work, the more difficult it can be for them to gain another job, e.g. loss of skills.
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Inflation
A sustained increase in the general price level over a period of time.
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Hyperinflation
Sustained % increase in the general price level for more than 50% of the year.
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Deflation
A sustained fall in the general price level over a long period of time.
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Consumer Price Index
A measure of changes in the price representitive of a basket of consumer goods and services. The UK's main measure of inflation has a 2% target.
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Cost-Push Inflation
Increases in the general price level caused by increases in costs of production, e.g. rise in oil prices.
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Demand-Pull Inflation
Increases in the general price level caused by increases in AD when the economy is close to full capacity.
103 of 106
Fiscal Drag
People's income being dragged into higer tax bands as a result of tax brackets not being adjusted in line with inflation makinf them worse-off.
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Menu Costs
The costs in terms of time and labour of changing prices due to inflation, e.g. restaurants reprinting menus.
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Shoe-Leather Costs
Costs in terms of extra time and effort involved in searching for the bank offering the highest rate of interest to save moeny or shops to find the cheapest deal.
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Other cards in this set

Card 2

Front

People out of work due to a decline of certain industry in a particular area.

Back

Regional Unemployment

Card 3

Front

Short-term unemployment where people in the labour force are between jobs.

Back

Preview of the back of card 3

Card 4

Front

People out of work who do not take the first job offered to them but spend time searching around for what they consider to be a good job.

Back

Preview of the back of card 4

Card 5

Front

People out of work in-between irregular periods of employment, eg. actors of supply teachers.

Back

Preview of the back of card 5
View more cards

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