macroeconomics key terms

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What is aggregate demand?
The total of all demands or expenditures in the economy at any given price
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What is the aggregate demand curve?
It shows the relationship between the price level and equilibrium national income. As the price level rises the equilibrium level of national income falls
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What is the accelerator theory?
the theory that the level of investment is related to past changes in income
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What is net investment?
gross investment-depreciation
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What is the net trade balance (net exports)
exports-imports
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What is aggregate supply curve?
The relationship between the average level of prices in the economy and the level of total output
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What are supply-side shocks?
factors such as changes in wage rates or commodity prices which cause the short run aggregate supply curve to shift
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What is the circular flow of income?
A model of the economy which shows the flow of goods, services and factors and their payments around the economy
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What are injections?
in the circular flow of income, spending which is not generated by households including investment, government spending and exports
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What is national income?
The value of the output, expenditure or income of an economy over a period of time
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What is wealth?
A stock of assets which can be used to generate a flow of production or income
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What are withdrawals (leakages)?
In the circular flow of income, spending by households which does not flow back to domestic firms. It includes savings, taxes and imports
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What is actual growth?
economic growth as measured by recorded changes in real GDP over time
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What is a boom (or peak)?
A period of time when the economy is growing strongly and is operating above its productive potential
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What is a demand side shock?
a sudden and large impact on aggregate demand
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What is a depression (or slump)?
A period of the trade cycle when there is a particularly deep and long fall in output
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What is a downturn?
A period of the trade cycle when there is a particularly deep and long fall in output
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What is a recession?
A period of the trade cycle when output or growth in output falls. Recession occurs when growth in output is negative for 2 successive quarters
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What is hysteresis?
The process whereby a variable does not return to its former value when changed. In terms of the trade cycle,it is used to describe the phenomenon of an economy failing to return to its former long term trend rate of growth after a severe recession
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What is the economic cycle (or trade cycle)?
Regular fluctuations in the level of economic activity around the productive potential of the economy
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What is meant by an active population?
Those in work or actively seeking work; also known as the labour force
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What is cyclical or demand deficient unemployment?
When there is insufficient demand in the economy for all workers who wish to work at current wage rates to obtain a job
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What is employment rate?
The number of those in work divided by the population of working age expressed as a percentage
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What is frictional unemployment?
When workers are unemployed for short lengths of time between jobs
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What is meant by inactive?
The number of those not in work and not unemployed
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What is real wage or classical unemployment?
When workers are unemployed because real wages are too high and inflexible downwards, leading to insufficient demand for workers from employers
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What is structural unemployment?
When the pattern of demand and production changes leaving workers unemployed in labour markets where demand has shrunk.e.g. regional unemployment
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What is meant by underemployed?
Those who would work more hours if available or are in jobs which are below their skill level
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What is unemployment?
When individuals are without a job but are actively seeking work
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What is the balance of payments account?
A record of all financial dealings over a period of time between economic agents of 1 country and all other countries
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What is the current account?
That part of the balance of payments account where payments for the purchase and sale of goods and services are recorded
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What is the capital and financial accounts?
That part of the balance of payments account where flows of savings, investment and currency are recorded
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What is privatisation?
The saleof government organisations or assets to the private sector
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Other cards in this set

Card 2

Front

What is the aggregate demand curve?

Back

It shows the relationship between the price level and equilibrium national income. As the price level rises the equilibrium level of national income falls

Card 3

Front

What is the accelerator theory?

Back

Preview of the front of card 3

Card 4

Front

What is net investment?

Back

Preview of the front of card 4

Card 5

Front

What is the net trade balance (net exports)

Back

Preview of the front of card 5
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