The sum total of demand from all sources in the economy
Aggregate demand
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The total output supplied from all sources in the economy
Aggregate supply
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Occurs when the exchange rate rises, making imports cheaper and raising the price of exports
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The difference in value between visible exports and visible imports
Balance of trade
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Set by the bank of england and influences interest rates across the economy
Base rate
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A time of rapid growth and expansion in the economy
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Stands for Brazil, Russia, India, China and (since 2010) South Africa
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Measures actual output as a percentage of the theoretical maximum possible output
Capacity utilisation
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Includes all assets that can generate income and includes premises, equipment and financial assets
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Production that uses large amounts of capital and relatively little labour
Capital intensive production
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Markets with completely free trade internally and a common external trade policy overing the rest of the world
Common markets
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Refers to the theory that if two countries specialise in a product which for them has the lowest opportunity cost, and then trade, real incomes will increase
Comparative advantage
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Occurs when two businesses that have nothing in common join together
Conglomerate integration
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Value every year's output at the price levels of a base year, removing the effects of inflation
Constant prices
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The total household spending on goods and services
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Inflation caused by an increase in the prices of inputs like labour, raw materials, etc. The increased price of the factors of production leads to a decreased supply of these goods
Cost-push inflation
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Policies that slow down economic activity by increasing leakages and reducing injections into the circular flow of money
Contractionary policies
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Unemployment that is caused by a downturn in the economic cycle. Spending is falling so output falls and fewer employees are needed
Cyclical unemployment
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Inflation caused by excess aggregate demand. Quantity demanded exceeds total output
Demand pull inflation
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A fall in the exchange rate that makes imports dearer and exports cheaper
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Occur when further increases in size begin to increase average costs and inefficiencies develop
Diseconomies of scale
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The amount of income a person can actually spend on goods and services. It measures consumers' spending power after tax
Disposable income
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The stage of the economic cycle when the boom slows and the rate of growth of GDP decreases
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The fluctuations in the levels and rates of growth of GDP over a period of time. It is sometimes referred to as the trade of business cycle
Economic cycle
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A reduction in average costs brought about by an increase in the size of the business
Economies of scale
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Means organising production so that waste is minimised and costs are the lowest possible
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Fast growing manufacturing sectors. Some are still poor but others, e.g. Mexico, may soon be described as developed
Emerging economies
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Refers to all those people of working age who have jobs
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Stimulate the level of economic activity by reducing leakages and increasing injections into the circular flow of money
Expansionary policies
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Ways of lengthening the maturity stage of the product life cycle
Extension strategies
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Reduce production costs for all businesses in the industry
External economies of scale
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Adjusts taxation and government expenditure either to stimulate or to cool down the economy. It is controlled by the Bank of England
Fiscal policy
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Refers to funds invested in other economies
Foreign direct investment (FDI)
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Groups of countries that trade completely freely with other, with no trade barriers, but each member country retains its own independent trade policies in relation to the rest of the world
Free trade areas
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The increasing interdependence of trading economies with increased imports, exports and capital movement
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Means that two businesses in the same industry have joined together
Horizontal integration
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The knowledge, experience and skills of individuals or of the workforce
Human capital
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Applies to products for which an income change causes a proportionately bigger change in quantity demanded
Income elastic
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Applies to products for which an income change causes a proportionately smaller change in quantity demanded
Income inelastic
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Measures the proportionally change in quantity demanded following a change in income
Income elasticity of demand
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A good or service that sees an increase in demand following a fall in income and a fall in demand following an increase in income
Inferior good
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Measured using either CPI, the headline rate and the basics for the government's target, or the RPI which includes housing costs, e.g. council tax and mortgage interest payments
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Investment, government expenditure and exports - increased demand for domestically produced goods and services
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The firm grows by joining with another firm by merger or takeover
Inorganic growth
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Related to the shift in average production costs for a business as it boosts its overall product output and the average cost per unit falls until maximum efficiency is attained
Internal economies of scale
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Spending now on capital assets that will generate income in the future
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Exports and imports cannot be touched or handled; they are services, e.g. insurance, banking or tourism
Invisible exports and imports
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A strategy to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs
Just-in-time (JIT)
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The Japanese word for continuous improvement. It summarises a whole company approach to quality control
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The highly influential economist who in the 1930s explained the importance of maintaining levels of aggregate demand during recessions
Keynes, J.M
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Production that uses large amounts of labour and relatively little capital
Labour intensive production
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The time taken from having an idea to selling the product to a consumer
Lead time
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Reduce the demand for domestically produced goods and services by diverting part of people's incomes into savings, taxes and spending on imports
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Refers to any system of production that minimises costs through eliminating waste
Lean production
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The mass of niche markets that has vastly extended consumer choice, with many small and larger businesses providing for small groups of consumers
Long tail
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The business with the most control over prices and output within its market
Market leader
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The range of marketing strategies that businesses use to promote and sell their product or services. It includes pricing, design and all forms of advertising
Marketing mix
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Exists when a successful business with a significant market share can influence prices and output in the market
Market power
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The average income, i.e. total income (GDP) divided by the population
Mean income
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The middle value in all incomes, %50% of incomes are above it, and 50% below
Median income
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The joining together of two or more firms into a single business with the approval of the shareholders and management concerned
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The marketing of products or services designed to meet the needs of a very small section of the market
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The lowest point of the average cost curve where all available economies of scale have been put to use
Minimum efficient scale
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Uses interest rates to control the level of spending in the economy. It is controlled by the Bank of England
Monetary policy
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Where there is only one firm in the market and no competition
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When a business is big enough to behave like a monopoly and control price or quantity supplied
Monopoly power
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Occurs when there is only one buyer of a product or service
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Occurs when a firm is the only buyer or is big enough to behave like a monopsony. This means that it can drive down the price of inputs simply by refusing to pay more
Monopsony power
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Businesses that are active in more than one country
Multi-national corporations (MNCs)
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Means that the value is expressed in numerical terms at current prices
Nominal value
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Any good or service for which quantity demanded rises when incomes rise and falls when incomes fall
Normal good
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Occurs when several large firms dominate the industry
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The firm grows from within using its own resources to expand output
Organic growth
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Buying inputs from independent suppliers, or locating the whole production process abroad
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Any buildings, tools and equipment that will help to generate output
Physical capital
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A price change causes a proportionately bigger change in quantity demanded
Price elastic
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A price change causes a proportionately smaller change in quantity demanded
Price inelastic
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Measures the extent to which a change in price affects quantity demanded
Price elasticity of demand
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The way in which a business decided on the price to charge and the facts that influence that decision
Pricing strategy
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Describes how efficiently resources are actually being used, usually by looking at output per unit of input
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Occurs when a completely new or improved product or services is created
Product innovation
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Occurs when a new or improved production method is used, enhancing efficiency and reducing costs
Process innovation
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The stages a product passes through, from an initial idea to the end of its life
Product life cycle
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The use of advertising, branding and public relations to increase sales
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Occur when government spending exceeds tax revenue and it borrows to fund the difference
Public sector deficit
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Refers to the traditional method of checking that products are of an adequate standard
Quality control
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Means ensuring that quality standards are agreed and met throughout the organisation
Quality assurance
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Means that the effect of inflation has been removed. It is nominal value minus the inflation rate
Real value
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Occurs when there are at least two consecutive quarters of negative growth in GDP
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Follows recession. GDP growth rises slowly at first, and then gathers pace. If it then growth faster, it may lead to a boom
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Includes land (raw materials and land itself), labour (the human input), capital (anything that is used to produce something else including tools), and enterprise (the human spark that combines the factors of production and produces something)
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Recognised abbreviation for Small and Medium sized Enterprises
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Occurs when people have the wrong skills for the employment on offer, or are located too far from the available jobs
Structural unemployment
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Designed to increase the productive capacity of the economy by influencing aggregate supply
Supply-side policies
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Sometimes the combination of two businesses that have merged will yield more than the expected results. Often illustrated as 2+2=5
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When a firm makes a bid for another and secures over 50% of the shares. That firm effectively swallows up the other one
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Employees are organised into teams that share responsibility for production
Team working
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Refers to employees' being involved in quality control and taking responsibility for the quality of their and their team's work
Total quality management (TQM)
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Describes a situation where events are unpredictable and beyond the control of the business
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Refers tot he number of people able and willing to work but not able to find a paying job. The Claimant Count based on the number of people claiming unemployment benefits. The ILO or LFS counts all available and looking for work
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Refers either to unemployed people whose work does not make full use of their qualifications or to those forced to take part in part-time employments
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Means two businesses in the same industry, but at different stages of the production process or supply chain, have joined together
Vertical integration
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Spreads product info from person to person as individuals pass messages on via social media, text or email
Viral marketing
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Other cards in this set

Card 2


The total output supplied from all sources in the economy


Aggregate supply

Card 3


Occurs when the exchange rate rises, making imports cheaper and raising the price of exports


Preview of the front of card 3

Card 4


The difference in value between visible exports and visible imports


Preview of the front of card 4

Card 5


Set by the bank of england and influences interest rates across the economy


Preview of the front of card 5
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