Macro Definitions

LEARN ALL OF THESE FOR THE EXAM!!!!

HideShow resource information
  • Created by: claire
  • Created on: 29-03-13 16:17
The 'Economic Problem'
The allocation of scarce resources to consumers with unlimited wants and needs and how this can be done efficiently.
1 of 57
The Factors of Production and their returns to the land
1) Land - Rent 2)Labour - Wages 3) Capital - Interest 4)Entrepreneurship - Profit/loss
2 of 57
Macroeconomics
The study of the economy as a whole and the relationship between one country and others
3 of 57
Gross Domestic Product (GDP)
The total value of Goods and Services produced by an economy in a year.
4 of 57
Real GDP and Nominal GDP
REAL GDP= The total value of goods and services produced by an economy in a year as adjusted by inflation and NOMINAL GDP=The total value of goods and services produced by an economy in a year in monetary terms.
5 of 57
ways of measuring GDP
1)National income method 2)national output method 3)national expenditure method
6 of 57
difficulties in measuring GDP
1)risk of double counting 2)need to exclude transfer payments 3) Identifying undeclared economic activity (black market) 4)measuring inflation accurately
7 of 57
economic growth
In the short run an increase in real GDP and in the long run and increase in the productive capacity of the economy
8 of 57
causes of economic growth
1)an increase in investment 2) increased government expenditure 3)Improved education/training 4)an increased size in the labour force 4)an increase in exports
9 of 57
Benefits of Economic growth
1)increased living standards 2)increased employment/reduced unemployment 3)increased provision of public services 4)reduction in poverty
10 of 57
The output gap
The difference between the actual level of GDP and the potential level of GDP of an economy
11 of 57
Circular flow of income
The flow of money around an economy between firms and households measuring income/expenditure/output
12 of 57
consumer expenditure
spending by households on consumer products
13 of 57
Interest rate
The charge for borrowing money and the return to savers
14 of 57
causes of an increase in consumer expenditure
1)a reduction in income tax 2)a fall in the interest rate 3)an increase in consumer confidence 4)a rise in wealth 5)a general increase in income
15 of 57
causes of a decrease in consumer expenditure
1)an increase in income tax 2)a rise in the interest rate 3)an decrease in consumer confidence 4)a rise in wealth 5)a general decrease in income 6)high/persistent price inflation above the rate of wage inflation
16 of 57
leakages of the circular flow of income
S - savings T - taxation M - imports
17 of 57
injections of the circular flow of income
I - investment G - government expenditure X - exports
18 of 57
the multiplier effect
the process by which a change in any component of GDP results in a final greater change in real GDP
19 of 57
causes for an increase in investement
1)a rise in consumer expenditure 2)a rise in business confidence 3)a fall in corporation tax 4)a fall in interest rates 5) advances in technology
20 of 57
unemployment
Individuals who are willing, able and actively seeking work but who do not have a job
21 of 57
Unemployment rate
percentage of the labour force who are out of work but willing and able to work
22 of 57
Causes of unemployment
1) A lack of aggregate demand 2)A switch in demand between industries 3) Changes in technology in an industry requiring less labour
23 of 57
ways of measuring unemployment
CLAIMANT COUNT=number of people claiming job seeker's allowance THE LABOUR FORCE SURVEY=the number of people who say they are seeking work
24 of 57
Structural unemployment
unemployment that is caused by a difference between the skills available in the work force and the skills required by businesses
25 of 57
Cyclical unemplyment
people out of work and unable to find work due to a lack of aggregate demand
26 of 57
seasonal unemployment
unemployment that is caused by there being different levels of demand for workers by industries at different times of the year.
27 of 57
Frictional unemployment
unemployment that is caused by people being out of work in the short term as they move between jobs
28 of 57
costs of unemployment
1)loss of potential output 2)lower potential living standard 3)lower tax revenue and increased spending on benefits 4)a worsening of the government budget position 5)increases in NHS costs 6)Increase in policing costs due to increases in crime
29 of 57
the inflation rate and deflation
INFLATION=a sustained rise in the general price level measured in percentage terms DEFLATION= a sustained decrease in the general price level
30 of 57
two types of inflation
COST-PUSH INFLATION=an increase in the general price level due to an increase in the costs of production DEMAND -PULL INFLATION= an increase i the general price level due to an increase in the level of aggregate demand
31 of 57
economic costs of inflation
1)menu costs 2)shoe leather costs 3)administrative costs 4)random redistribution of income 5)fiscal drag 6)discouragement of investment 7)inflationary noise 8)loss of international competitiveness
32 of 57
Balance of Payments (BoP)
A record of the money flows into and out of a country i.e. the total value of imports and exports
33 of 57
Exports and Imports
EXPORTS=goods and services sold abroad IMPORTS=goods and services bought from abroad
34 of 57
the current account and the capital account
CURRENT ACCOUNT=the net value of exports and imports of goods(visibles) and services(invisibles) by an economy. THE CAPITAL ACCOUNT=the net flow of money into an economy from savings and investement
35 of 57
a current account defecit
where more money is leaving the economy than entering it as a result of imports being greater than exports
36 of 57
government macroeconomic policy objectives
1)low inflation; CPI 2% 2)Full employment: UK non-inflationary level of unemployment - 4-5% 3)Economic Growth: UK trend growth rate - 2.5-3% 4)BoP: equilibrium 5)Income redistribution: fair redistribution from rich to poor 6)Economic Stability:low l
37 of 57
Aggregate Demand
The total value of goods and services demanded by households and firms in an economy made up of - concumption, investment, government expenditure and exports-imports (C+I+G+(X-M))
38 of 57
Aggregate Supply
The total value of goods and servicesthat producers in an economy are willing and able to supply at a given price level in a given period of time
39 of 57
factors causing an increase in AS
1)advances in technology 2)net increase in investment 3)improved training and education 4)a rise in the age of retirement 5)an increase in the size of the labour force 6)falls in the costs of production 7)supply-side policies
40 of 57
macroeconomic equilibrium
A situation where there is no pressure for price level of an economy to change as aggregate demand equals aggregate supply
41 of 57
Budget deficit
government expenditure being greater than income from taxation over a year
42 of 57
Fiscal ploicy
Government control of taxation and spending
43 of 57
Deflationary fiscal policiy
tax and spending policy that looks to reduce the rate of inflation through reducing the level of aggregate demand
44 of 57
reflationary fiscal policy
tax and spending policy that looks to increase the level of aggregate demand and hence will result in an increased rate of inflation
45 of 57
Monetary Policy
Government control/management of the money supply, interest rates and the exchange rate
46 of 57
Supply-side policiy
Government policy focused on increasing the productive capacity of the economy
47 of 57
Some supply-side policies
1)education and training 2) Increased expenditure on infrastructure 3)reduction in income/business taxes 4)encourage enterprise 5)privatisation 6)removing employment laws 7)reducing employment laws 8)reduce the powers of trade unions 9)reduce benefit
48 of 57
the exchange rate
The price of one currency in terms of another
49 of 57
factors that could cause a fall in the exchange rate
1)a rise in inflation 2)a cut in interest rates 3)a fall in the quantity of products/competitiveness 4)a current account deficit 5)government intervention with the money supply 6)speculation
50 of 57
free trade
trade between countries with no arificial barriers such as tariffs or quotas
51 of 57
protectionism
trade between countries that is restricted through the use of tariffs or quotas
52 of 57
benefits of international trade
higher living standards, more choice of goods and services, lowere prices/inflation, higher quality products and raw materials, improved productivity: increased GDP through increased net exports via specialisation and comparative advantage
53 of 57
Tariff and Quota
TARIFF=a tax on imports into an economy QUOTA=a limit on the quantity of goods imported into an economy
54 of 57
reasons why a country's exports might decline
1)a strengthening of domestic currency 2)the imposition of trade restrictions by foreign countries 3)a fall in foreign/world income 4)a rise in the competitiveness of foreign producers
55 of 57
reasons why a countries imports may decline
1)a fall in the exchange rate 2)the imposition of trade restrictions 3)a fall in domestic income 4)a rise in the competitiveness of domestic producers
56 of 57
ways of reducing protectionism
1)reduction of tariffs 2)increase in quota levels or abolition of quotas 3)removal of embargoes 4)removal of subsidies 5)joining an international trading block
57 of 57

Other cards in this set

Card 2

Front

1) Land - Rent 2)Labour - Wages 3) Capital - Interest 4)Entrepreneurship - Profit/loss

Back

The Factors of Production and their returns to the land

Card 3

Front

The study of the economy as a whole and the relationship between one country and others

Back

Preview of the back of card 3

Card 4

Front

The total value of Goods and Services produced by an economy in a year.

Back

Preview of the back of card 4

Card 5

Front

REAL GDP= The total value of goods and services produced by an economy in a year as adjusted by inflation and NOMINAL GDP=The total value of goods and services produced by an economy in a year in monetary terms.

Back

Preview of the back of card 5
View more cards

Comments

davidsalter

56 flash cards covering the main definitions required for the AS economics exam

potatoeface

gj jg

Similar Economics resources:

See all Economics resources »See all Macroeconomic indicators resources »