Government economic policy objectives and indicators of national economic performances DEFINITIONS

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Elastic:
Responsive to a change in market conditions.
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Inflation Rate:
The percentage increase in the price level over a period of time.
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Sustainable Economic Growth:
Economic growth that can continue over time and does not endanger future generations' ability to expand productive capacity.
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Trend Growth:
The expected increase in potential output over time. It is a measure of how fast the economy can grow without generating inflation.
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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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Current Account Deficit:
When more money is leaving the country than entering it, as result of sales of its exports, income and current transfers from abroad being less than imports and income and current transfers going abroad.
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Hyperinflation:
An inflation rate above 50 per cent.
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Labour productivity:
Output per worker hour.
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Nominal GDP:
Output measured in current prices and so not adjusted for inflation.
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Informal economy:
Economic activity that is not recorded or registered with the authorities in order to to avoid paying tax or complying with regulations, or because the activity is illegal.
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Economy of scale:
The advantage of producing on large scale, in the form of lower long-run average cost.
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Unemployment Rate:
The percentage of the labour force who are out of work.
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Labour Force Survey:
A measure of unemployment based on a survey using the ILO definition of unemployment.
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International Labour Organisation:
•ILO •A member organisation of the United Nations that collects statistic on labour market conditions and seeks to improve working conditions.
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Claimant Count:
A measure of unemployment that includes those receiving unemployment- related benefits.
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Consumer Prices Index:
A measure of changes in the price of a representative basket of consumer goods and services. Differs from the RPI (retail prices index) in methodology and coverage.
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Retail Prices Index:
•RPI •measure of inflation that is used for adjusting pensions and other benefits to take account of changes in inflation and frequently used in wage negotiations. Differs from the CPI (consumer prices index) in methodology and coverage.
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Cyclical Unemployment:
Unemployment arising from a lack of aggregate demand.
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Structural Unemployment:
Unemployment caused by the decline of certain industries and occupations due to changes in demand and supply
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Frictional Unemployment:
Short term unemployment occurring when workers are in-between jobs
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Demand-pull Inflation:
Increases in the price level caused by increases in aggregate demand.
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Cost-push Inflation:
Increases in the price level caused by increases in the costs of production.
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Hysteresis:
Unemployment causing unemployment.
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Long-term Unemployment:
Unemployment lasting for more than a year.
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Economic Growth:
In the short run, an increase in real GDP, and in the long run an increase in in productive capacity, that is, in the maximum output that the economy can produce.
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Unemployment:
A situation where people are out of work but are willing and able to work.
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Labour Force:
The people who are employed and unemployed, that is, those who are economically active.
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Economically Inactive:
People of working age who are neither employed nor unemployed.
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Deflation:
A sustained fall in the general price level.
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Balance of Payments:
A record of money flows coming in and going out of a country.
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Menu Costs:
The costs of changing prices due to inflation.
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IMF
(International Monetary Fund). An international organisation that helps coordinate the international monetary system
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WTO
(World Trade Organisation). An international organisation that promotes free international trade and rules on international trade disputes.
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Exchange Rate
The price of one currency in terms of another currency or currencies.
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MPC
(Monetary Policy Committee). A committee of the Bank of England with responsibility for setting the interest rate in order to meet the government's inflation target.
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Shoeleather Costs:
Costs in terms of the extra time and effort involved in reducing money holdings.
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Inflationary Noise:
The distortion of price signals caused by inflation.
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Real Interest Rate:
The nominal interest rate minus the inflation rate.
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Fiscal Drag:
People's income being dragged into higher tax bands as a result of tax brackets not being adjusted in line with inflation.
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Card 2

Front

The percentage increase in the price level over a period of time.

Back

Inflation Rate:

Card 3

Front

Economic growth that can continue over time and does not endanger future generations' ability to expand productive capacity.

Back

Preview of the back of card 3

Card 4

Front

The expected increase in potential output over time. It is a measure of how fast the economy can grow without generating inflation.

Back

Preview of the back of card 4

Card 5

Front

A situation where those wanting and able to work can find employment at the going wage rate.

Back

Preview of the back of card 5
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