Macroeconomics Definitions

All the key terms for the OCR F582 National Economy exam defined.

HideShow resource information
  • Created by: Marcus
  • Created on: 28-04-13 13:00
Circular flow of income
The movement of spending and income throughout the economy between households and firms
1 of 88
Macroeconomic Policy Objective
A government macroeconomic goal e.g. low unemployment, sustainable economic growth, low and stable inflation, balance of payments equilibrium, economic stability and an even distribution of income
2 of 88
Leakages
Withdrawals of possible spending from the circular flow of income e.g. imports, taxation and saving
3 of 88
Injections
Additions of extra spending into the circular flow of income e.g. exports, government spending and investment
4 of 88
Unemployment
People who are willing and able to work in the next two weeks but are currently out of work and actively seeking work.
5 of 88
Unemployment Rate
% of the labour force who are willing and able to work in the next two weeks but are currently out of work and actively seeking work
6 of 88
Labour Force
The number of people in an economy who are employed and the number who are unemployed i.e. those who are economically active
7 of 88
Claimant Count
A measure of unemployment that is the number of people receiving job seeker's allowance e.g.willing and able to work and actively seeking work every two weeks
8 of 88
Labour Force Survey
A measure of unemployment based on a survey sample using the ILO unemployment definition i.e. those who are willing and able to work and actively seeking work every four weeks
9 of 88
Inflation
A sustained increase in the general price level in an economy over a period of time
10 of 88
Inflation Rate
A sustained % increase in the general price level in an economy over a period of time
11 of 88
Consumer Price Index
A measure of changes in the price of a representative basket of consumer goods and services. It is the UK's main measure of inflation and has a 2% target.
12 of 88
Cost-push Inflation
Increases in the general price level in an economy over a period of time caused by increases in costs of production e.g. rising oil prices
13 of 88
Demand-pull Inflation
Increases in the general price level in an economy over a period of time caused by increases in aggregate demand when the economy is close to full capacity
14 of 88
Gross Domestic Product
The total output of goods and services produced in a country over a given time period, irrespective of ownership
15 of 88
Real Gross Domestic Product
The total output produced in an economy over a given period of time measured in constant prices and so adjusted for inflation
16 of 88
Economic Growth
In the short-term, an increase in real GDP, and in the long-term, an increase in the productive capacity of the economy
17 of 88
Economic Growth Rate
% increase in real GDP in an economy over a given time period
18 of 88
Sustainable Economic Growth
An increase in real GDP that can continue over time and does not endanger future generations' ability to expand the productive capcity of the economy
19 of 88
Recession
Two consecutive quarters of negative economic growth
20 of 88
Balance of Payments
A record of all money flows coming in and going out of a country
21 of 88
Imports
Spending on goods and services from abroad. A leakage from the circular flow of income
22 of 88
Exports
Domestic goods and services bought by consumers abroad. An injection into the circular flow of income
23 of 88
Balance of Trade
Exports minus imports of goods and services. A negative trade balance is a deficit, a positive trade balance is a surplus
24 of 88
Trade Deficit
The value of imported goods and services exceeds the value of exported goods and services
25 of 88
Trade Surplus
The value of exported goods and services exceeds the value of imported goods and services
26 of 88
Trade Balance
The value of imported goods and services equals the value of exported goods and services
27 of 88
Current Account Surplus
More money is entering the country than leaving it, as a result of its exports, income and current transfers from abroad being greater in value than imports, income and current transfers going abroad
28 of 88
Current Account Deficit
When more money is leaving the country than entering it, as a result of its exports, income and current transfers from abroad being less in value than imports, income and current transfers going abroad
29 of 88
Exchange Rate
The price of one currency in terms of another e.g. $1.5 = £1
30 of 88
Aggregate Demand
The total demand for a country's goods and services at a givern price level and over a given time period
31 of 88
Consumption
Spending by households on consumer goods and services e.g. cars
32 of 88
Investment
Spending by firms on capital goods e.g. machinery to expand capacity
33 of 88
Government Spending
Spending by the central bank and local government on goods and services e.g. education
34 of 88
Net Exports
Spending on exports minus spending on imports in an economy over a given time period
35 of 88
Aggregate Supply
Total output supplied by all domestic firms at each given price level over a given time period
36 of 88
Macro Equilibrium
Where aggregate demand equals aggregate supply
37 of 88
Fiscal Policy
The use of taxation and government spending to control aggregate demand
38 of 88
Monetary Policy
The use of interest rates, money supply and exchange rate to control aggregate demand
39 of 88
Rate of Interest
The cost of borrowing and the reward for lending
40 of 88
Interest Rate
The charge for borrowing money and the amount paid for lending money
41 of 88
Budget Deficit
When government spending is greater than tax revenue collected over a year
42 of 88
Balanced Budget
When government spending equals tax revenue collected over a year
43 of 88
Disposable Income
Income after taxes on income have been deducted and state benefits have been added
44 of 88
Corporation Tax
A direct tax on firms' profits
45 of 88
Income Tax
A progressive direct tax on people's incomes
46 of 88
Value Added Tax
An indirect tax on the consumption of goods and services, currently 20%
47 of 88
Saving
Real disposable income minus spending
48 of 88
Free Trade
The exchange of goods and services between countries without any restrictions and protectionist policies e.g. tariffs
49 of 88
International/External Trade
The exchange of goods and services between countries
50 of 88
Protectionism
The protection of domestic industries from foreign competition, aiming to reduce imports or raise exports to reduce a current account deficit e.g. tariffs
51 of 88
Protectionist Policies
Government policies that aim to protect domestic industries from foreign competition, aiming to reduce imports or raise exports to reduce a current account deficit e.g. tariffs
52 of 88
Tariff
A tax on imports expressed as a %. An example of a protectionist policy
53 of 88
Quota
A physical limit on the quantity of goods imported to lower imports and improve a current account deficit
54 of 88
Consumer Confidence
How optimistic consumers are about future econmic prospects, affecting their level of spending
55 of 88
Economically Inactive
People of working age who are neither employed nor unemployed e.g. university students
56 of 88
Labour Productivity
Output of a good or service per worker over a given time period e.g. output per worker per hour
57 of 88
Structural Unemployment
People out of work over the long-term due to the decline of certain industries and occupations, e.g. de-industrialisation, due to changes in supply and demand
58 of 88
Technological Unemployment
People out of work due to labour being replaced by more efficient capital e.g. automated car assembly lines replacing manual assembly
59 of 88
International Unemployment
People out of work due to firms replacing domestic workers with workers from overseas, usually because their labour is cheaper
60 of 88
Regional Unemployment
People out of work due to a decline of a certain industry in a particular area
61 of 88
Search Unemployment
People out of work due to them not taking the first job offered and searching for an even better job instead
62 of 88
Casual Unemployment
People out of work in-between irregular period of employment e.g. actors, session musicians
63 of 88
Seasonal Unemployment
People out of work because their labour is only demanded at a particular time of year e.g. ice cream seller
64 of 88
Classical Unemployment
People out of work due to wage costs rising and firms not being able to afford them e.g. trade unions bidding up wages or a rise in the minimum wage
65 of 88
Cyclical Unemployment
People out of work due to low aggregate demand and a lack of derived demand for labour during a recession
66 of 88
Hysteresis
Unemployment generating further unemployment as those unemployed lose their skills and become less employable, making it more difficult for them to become employed
67 of 88
Hyperinflation
Sustained percentage increase in the general price level of an economy of more than 50% per year
68 of 88
Deflation
A fall in the general price level in an economy over a period of time
69 of 88
Fiscal Drag
People's incomes being dragged into higher tax bands as a result of tax brackets not being adjusted in-line with inflation, causing real disposable incomes to fall
70 of 88
Menu Costs
The costs in terms of time and labour of changing prices due to inflation e.g. restaurants reprinting menus
71 of 88
Shoe-leather Costs
Costs in terms of extra time and effort involved in searching for the bank offering the highest interest rate to save, or searching for the cheapest deal on a product
72 of 88
Inflationary Noise
The distortion of price signals caused by inflation. Market prices do not signal the reletive scarcity of products efficiently, creating uncertainty for consumers and shoe-leather costs
73 of 88
Wage-price Spiral
Workers ask for pay rises to maintain their real purchasing power, leading to higher costs for firms, who may pass these costs on as higher product prices, creating even more inflation and an upwards spiral effect
74 of 88
Informal Economy
Economic activity that is not recorded with the authorities, in order to avoid paying tax or because the activity is illegal
75 of 88
Trend Growth
The expected increase in potential output over time. A measure of how fast an economy can grow without generating inflation
76 of 88
Economic/Business Cycle
The tendency for economic activity to fluctuate outside its trend growth rate. Movement from high growth (boom) to negative growth (recession).
77 of 88
Boom
A period in the business cycle characterised by high economic growth and demand-pull inflation
78 of 88
Economic Recovery
When an economy's real GDP begins to rise after a period of negative economic growth
79 of 88
Human Capital
Education, training and experience that a worker or group of workers posesses
80 of 88
Direct Taxation
Taxes levied on income or profits that cannot be avoided e.g. income tax or corporation tax
81 of 88
Indirect Taxation
Taxes levied on the consumption of goods and services e.g. VAT
82 of 88
Progressive Tax
A tax that takes a high percentage of income from the rich e.g. income tax
83 of 88
Regressive Tax
A tax that takes a greater percentage of income from the poor e.g. raising VAT
84 of 88
Automatic Stabilisers
Forms of government spending and taxation that change automatically to offset fluctuations in economic activity i.e. keep the economic cycle nearer the trend growth rate throughout
85 of 88
Target Savers
People who save with a target figure in mind e.g. for a car or pension
86 of 88
Embargo
A ban on an imported good to lower imports and improve a current account deficit
87 of 88
Subsidy
A direct payment from the government to producers to lower costs and encourage production
88 of 88

Other cards in this set

Card 2

Front

A government macroeconomic goal e.g. low unemployment, sustainable economic growth, low and stable inflation, balance of payments equilibrium, economic stability and an even distribution of income

Back

Macroeconomic Policy Objective

Card 3

Front

Withdrawals of possible spending from the circular flow of income e.g. imports, taxation and saving

Back

Preview of the back of card 3

Card 4

Front

Additions of extra spending into the circular flow of income e.g. exports, government spending and investment

Back

Preview of the back of card 4

Card 5

Front

People who are willing and able to work in the next two weeks but are currently out of work and actively seeking work.

Back

Preview of the back of card 5
View more cards

Comments

davidsalter

Report

This is a set of 88 flash cards defining many of the key terms required up to A2 standard. Useful for testing yourself and colleagues. Should demonstrate further learning needs.

Nimrahkhan

Report

Good resource, some cards aren't needed in 2015 spec, and some (taxation and subsidies) are needed for unit 1 not unit 2 but still very helpful for last minute revision

Similar Economics resources:

See all Economics resources »See all Unemployment resources »