Unit 2 Key Terms

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  • Created on: 24-04-14 20:32
Factors of production
Resources comprising land (including natural resources), labour, capital and enterprise.
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Economic growth
Growth in output of the economy over time - a growth of real GDP over time.
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Gross Domestic Product (GDP)
The total value of goods and services produced in the country in a year.
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GDP per capita
GDP divided by the total population, therefore GDP per head.
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Full employment
When all those able and willing to work are in paid employment at the current wage rate.
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Unemployment
When workers who are able and willing to work are unable to find employment at current wage rates.
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Claimant count
Measures unemployment according to the number of people claiming unemployment-related benefits (such as Jobseeker's Allowance).
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Labour Force Survey
A survey of a sample of households, counting people as unemployed if they are actively seeking work but do not have a job (in the week of the survey).
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Inflation
A sustained rise in the general price level over time.
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Price stability
The general level of price is kept constant or grows at an acceptably low rate over time.
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Rate of inflation
The rate at which the general price level rises over time.
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Consumer Price Index
The official measure of the rate of inflation.
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Monetary inflation
Inflation caused by growth in the economy's money supply.
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Demand-pull inflation
Inflation caused by excess demand in the economy.
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Cost-push inflation
Inflation caused by a rise in costs in the economy.
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Hyperinflation
A rate of inflation so high that the value of money becomes close to worthless.
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Tax
A compulsory payment to the government.
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Direct tax
A tax on income or wealth.
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Indirect tax
A tax on spending, often defined as a tax on goods and services.
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External cost
The negative impact of an economic transaction on a party who is not directly involved in the transaction. For example, manufacturing that causes air pollution has costs for the whole population (negative externality and positive externality).
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Demerit good
A good or service whose consumption is considered unhealthy or undesirable due to its bad effects on the consumers. It is over-consumed if left to market forces. Demerit goods have negative externalities and merit goods have positive externalities.
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Distribution of income
How incomes are shared out among the people of the country.
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Redistribution of income
A policy to reduce the inequalities of income so that incomes are distributed more evenly.
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Inequalities of income
Incomes are distributed unevenly so some people have a much higher income than others.
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Transfer payments
Benefits to citizens which are paid out of tax revenue.
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Regressive tax
A tax that takes a greater proportion of income from lower incomes, or a smaller percentage of a lower income.
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Proportional tax
A tax that takes the same proportion of income from all income levels.
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Progressive tax
A tax that takes a greater proportion of income from higher incomes, or takes a smaller percentage of a lower income.
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Market failure
When the market (through demand and supply) fails to allocate resources in the best interests of society as a whole.
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Fiscal policy
A policy that uses taxation and government spending to try to achieve the objectives of the government.
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Balanced budget
Government spending is equal to tax revenue.
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Budget deficit
Government spending is greater than tax revenue.
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Budget surplus
Tax revenue is greater than government spending.
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Multiplier effect
A process by which an original change in incomes in the economy leads to a total change in incomes which is a multiple of the original change.
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Money
Anything that is generally acceptable as a medium of exchange.
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Banks and building societies
Financial institutions that accept deposits and make loans.
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Interest rate
The reward for saving and the cost of borrowing.
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Monetary policy
A policy aimed at affecting the total supply of money in the economy.
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Interest rate policy
The use of interest rates to try to achieve the government's economic objectives.
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Bank rate
The interest rate set by the Bank of England, which affects all interest rates in the economy (also called the base rate).
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Supply-side policies
Policies that increase the ability of the economy to supply more goods and services.
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Other cards in this set

Card 2

Front

Growth in output of the economy over time - a growth of real GDP over time.

Back

Economic growth

Card 3

Front

The total value of goods and services produced in the country in a year.

Back

Preview of the back of card 3

Card 4

Front

GDP divided by the total population, therefore GDP per head.

Back

Preview of the back of card 4

Card 5

Front

When all those able and willing to work are in paid employment at the current wage rate.

Back

Preview of the back of card 5
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