ECONOMICS UNIT 2

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Unemployment
The number of people of working age who are seeking work yet do not have a paid job.
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Economically Active
Those either looking for work or in work.
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Economically Inactive
Those of working age who have chosen not to do paid work or look for paid work.
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Gross Domestic Product (GDP)
The value of output produced by domestic based resources per year.
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Economic Growth
The capacity of the economy to produce more goods and services over time.
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Real Growth
Growth of GDP after inflation has been accounted for (i.e at constant prices).
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Nominal Growth
Growth of GDP before inflation has been accounted for ( i.e. at current prices)
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Inflation
A persistent increase in the level of prices.
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Deflation
A situation where prices persistently fall.
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Balance of Payments
Exports minus imports- a deficit means more is imported than exported.
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Balanced Budget
Where government receipts equal government spending in a financial year.
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Budget Deficit
Where government spending exceeds government spending in an financial year.
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Investment Income
Earnings from ownership of assets.
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Circular Flow of Income
Model which explains what determines the equilibrium level of national income.
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Injections
Money that originates outside the circular flow and so will increase national income/output/expenditure.
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Withdrawals
Any money not passed on in the circular flow and has the effect of reducing national income/output/expenditure.
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Multiplier Effect
Where an increase or decrease in spending leads to a larger than proportionate change in the national income.
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Aggregate Demand (AD)
Total planned expenditure in the economy. Known by the identity C+ I + G + (X-M)
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Accelerator Effect
The relation between the change in new investment and rate of change of national income.
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Aggregate Supply (AS)
The total value of goods and services supplied in the economy.
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Consumption
Spending by domestic households on consumer goods and services.
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Investment (I)
Spending by firms on buildings,machinery and improving the skills of the labour force.
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Wealth Effect
A rise in personal wealth will encourage consumers to spend more and save less.
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Negative Output Gap
Where the economy is producing less than its trend output.
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Positive Output Gap
When actual GDP exceeds trend GDP increasing inflationary pressure.
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Recession
Declining real GDP for two successive quarters.
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Cyclical Unemployment
Demand deficient unemployment that occurs as a result of the economic cycle.
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Frictional Unemployment
People between jobs.
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Structural Unemployment
Unemployment caused by a change in the demand side or supply side of the economy.
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Occupational Immobility
As patterns of demand and employment change,many workers may find it difficult to easily secure new jobs,since they may lack necessary skills
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Allocative Efficiency
This is achieved in an economy when it is not possible to make anyone better off without making someone worse off, or you cannot produce more of one good without making less of another.
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Boom/Bust Policy
The government using macroeconomic tools to stimulate and then contract the economy.
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Capital Spending
Government spending to improve the productive capacity of the nation, including infrastructure,schools and hospitals.
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Contractionary Fiscal Policy
Increasing levels of tax revenue relative to government spending, appropriate during a boom in economic activity.
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Cost Push Inflation
Where increased costs of production result in firms increasing their prices leading to an increase in the general price level.
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CPI (Consumer Price Index)
A measure of the price level similar to the HICP (Harmonized Index of Consumer Prices) used widely in the Eurozone. Used since 2004 as the target measure for inflation by government and MPC.
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Credit Crunch
Where borrowing becomes more expensive or unavailable.
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Demand Pull Inflation
Where AD exceeds AS leading to an increase in the level of prices.
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Deregulation
The process of removing government controls from market.
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Disposable Income
Income available to households after the payment of income tax and national insurance contribution.
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Fiscal Policy
The policy of the government regarding taxation and government expenditure.
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Interest Rates
The cost of borrowing or the reward of saving.
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Long-run AS
The economy's productive capacity.
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Monetary Policy
Controlling the macroeconomy via changes in monetary variables such as the money supply or interest rates.
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Opportunity Cost
The next best alternative forgone(given up) when an economic decision is made.
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Policy Instrument
Techniques used to achieve policy objectives
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Policy Objective
Government's major macroeconomic objectives.
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Privatisation
Sale of governments owned assets of the private sector.
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Recession
When an economy is growing at less than its long-term trend rate of growth.
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Trade-off
Where one macroeconomic objective has to be curtailed in favour of another objective.
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Transfer Payments
Government payments to individuals for which no service is given, e.g. state benefits.
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Other cards in this set

Card 2

Front

Those either looking for work or in work.

Back

Economically Active

Card 3

Front

Those of working age who have chosen not to do paid work or look for paid work.

Back

Preview of the back of card 3

Card 4

Front

The value of output produced by domestic based resources per year.

Back

Preview of the back of card 4

Card 5

Front

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

Back

Preview of the back of card 5
View more cards

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