accelerator effect
the relation between the change in new investment and the rate of change of national income
1 of 180
actual supply
the amount that producers in fact produce. This can differ from planned supply as there can be breakdowns in production
2 of 180
aggregate demand
total planned expenditure in the economy. Formula is C +I +G + (x-m
3 of 180
Aggregate supply
the total value of goods and services supplied in the economy
4 of 180
Allocative efficiency
this is achieved in an economy when it is not possible to make anyone better without making someone worse off or you cannot produce more of one good without making less of another
5 of 180
Balance of Payments
Exports minus imports. A deficit meaning more is imported than exported.
6 of 180
Balance of trade
visible exports minus visible imports
7 of 180
Balanced budget
where government revenue equal government spending in a financial year
8 of 180
boom/bust policy
the government using macroeconomic tools to stimulate and then contract the economy
9 of 180
Broad Money
money that is held in banks and building societies but isn't immediately accessible. It includes more than just physical money.
10 of 180
Budget deficit
where government spending exceeds government revenue in a finacial year
11 of 180
budget surplus
where government revenue exceeds government spending in a finacial year
12 of 180
buffer stock
an intervention system that aims to stop to limit the fluctuations of the price of a commodity
13 of 180
capital spending
government spending to improve the productive capacity of the nation, including infrastructer, schools and hospitals
14 of 180
central bank
the financial instituation in a country responsible for issuing notes, coins and setting the short term interest rates
15 of 180
classical view
economists who believed that recessions and slumps would cure themselves
16 of 180
a good that is traded, usually referring to raw materials or semi-manufactured goods that are traded in bulk such as tea or wheat. Normally unbranded goods.
17 of 180
a market situation in which there are a large number of buyers and sellers
18 of 180
complementary products
goods that are consumed together for example bread and butter
19 of 180
complete market failure
where the free market fails to provide a product at all like a public good
20 of 180
composite demand
a good that is demanded for more than one purpose so that an increase in demand for one purpose reduces the available supply for the other purpose leading to higher prices. e.g milk used in butter and cheese.
21 of 180
contraction in supply
when the amount offered for sale is reduced because the price level has fallen
22 of 180
contractionary fiscal policy
increasing levels of tax revenue relative to government spending, appropriate during a boom in economic activity.
23 of 180
contraction in demand
falls in the quantity demanded caused by rises in prices
24 of 180
cost push inflation
where increased costs of production results in firms increasing their prices leading to an increase in the general price level
25 of 180
credit crunch
where borrowing becomes more expensive or unavailable
26 of 180
current account equilibrium
where the current account exercises no effect on the domestic macroeconomy
27 of 180
current spending
government spending on the day to day running of the public sector including raw materials and wages of public sector workers
28 of 180
cyclical unemployment
demand deficient unemployment that occurs as a result of the economic cycle
29 of 180
a situation where prices persistently fall
30 of 180
a fall in the proportion of national output accounted for by the manufacturing sector of the economy
31 of 180
the amount that consumers are willing and able to buy at each given price level per unit
32 of 180
demand deficient unemployment
insufficient aggregate demand in the economy to employ the available labour
33 of 180
demand pull inflation
where aggregate demand exceeds aggregate supply leading to an increase in the level of prices
34 of 180
demand side fiscal policy
change in the level or structure of government spending and taxation aimed at influencing one or more of the components of aggregate demand
35 of 180
demerit good
a good that would be over-consumed in a free market as it brings less overall benefit to consumers than they realise. It is over-consumed and normally has negative externalities
36 of 180
the process of removing government controls from markets.
37 of 180
derived demand
when the demand for one good or service comes from the demand for another good or service. the demand for cars stimulate the demand for steel. Steel is derived demand
38 of 180
discouraged workers
workers who leave the market because despite many attempts they are unable to find a job
39 of 180
discretionary fiscal policy
the deliberate manipulation of government spending and taxation to influence the economy.
40 of 180
diseconomies of scale
where an increase in the scale of production leads to increases in average total costs for firms
41 of 180
a situation within the market where supply does not equal demand
42 of 180
disposable income
income available to households after the payment of income tax and national insurance
43 of 180
division of labour
breaking the production process down into a sequence of tasks, with workers assigned to particular tasks
44 of 180
Economic goods
goods that are scarce and have an opportunity cost
45 of 180
economic growth
the capacity of the economy to produce more goods and services over time
46 of 180
economic indicators
economic statistics that provide information about the expansions and contractions in business cycles
47 of 180
economic models
these are used to show the essential characteristics of complicated economic conditions in order to analyse them and predict the result of changes of variables
48 of 180
economic welfare
refers to the satisfaction an individual or society gets from the allocaion of resources. this may involve the standard of living for example
49 of 180
economies of scale
where an increase in the scale of production leads to reductions in average total cost for firms
50 of 180
effective demand
demand supported by the ability or real purchasing power to pay for a good or service
51 of 180
where labour is actively engaged in a productive activity usually in exchange for payments such as wages
52 of 180
the price at which supply is equal to demand and there is no tendency to change
53 of 180
ex ante
a term that refers to future events
54 of 180
ex post
a term that refers to after the event
55 of 180
excess demand
when demand is greater than supply at a given price
56 of 180
excess supply
when supply is greater than demand at a given price signalling to producers to lower prices
57 of 180
exchange rate
the price at which one currency exchanges for another eg the US dollar and the UK pound
58 of 180
expansionary fiscal policy
increasing levels of government spending relative to tax revenue, appropiate to stimulating aggregate demand during a downturn in economic activity.
59 of 180
the sale of goods or services to a foreign country. It generates income for the home country
60 of 180
goods or services sold abroad
61 of 180
extension in supply
when there is an increase in supply because the market price has risen
62 of 180
extensions in demand
increases in demand caused by a fall in price
63 of 180
costs or benefits that spill over to third parties external to a market transaction
64 of 180
factor market
the market for the factors of production that make other goods and services such as labour
65 of 180
information failure
when consumers don't understand the full benefits or disadvantages of a transaction
66 of 180
fiscal policy
the policy of the government regarding taxation and government expenditure
67 of 180
fixed costs
when cost of production don't vary as output changes
68 of 180
measured over a specificed period of time
69 of 180
free goods
goods that have no opportunity cost, eg air
70 of 180
free market economy
when there is a very limiited government involvement in providing goods and services. Only job is to ensure the market rules are fair.
71 of 180
Free rider problem
where some consumers benefit from other consumers purchasing a good, particularly in the case of a public good with parking tickets.
72 of 180
Frictional/search unemployment
people between jobs
73 of 180
GDP per capita
GDP divided by the population - a measure of living standards
74 of 180
geographical immobility
when workers find it difficult to move to where employment is due to family ties or due to differences in housing costs
75 of 180
the ability to produce and sell in any country in the world
76 of 180
goods and services
goods are tangible products such as cd whereas services are not tangible like a train journey
77 of 180
government failure
when government intervention to correct market failure does not improve the allocation of resources or leads to a worsening of the situation. The costs of government intervention exceeds the benefits
78 of 180
gross domestic product
the total value of goods and services produced in the economy
79 of 180
hot money
money that is available to rapid tranfser from country to another
80 of 180
human capital
the skills, motivation, and knowledge of labour. Improvements of human capital improve productivity and shift ppb to the right
81 of 180
the purchase of goods and services from foreign countries. Leads to expenditure for the home country
82 of 180
goods or services purchased abroad
83 of 180
incidence of tax
the proportion of a tax that is passed onto the consumer
84 of 180
the flow of earnings to a factor of production over a period of time eg wages
85 of 180
income elasticity of demand
proportion to which demand changes when there is a change in income. Formula is percentage change of quantity demanded divided by percentage change of income
86 of 180
income induced
will increase as income increases and decrease as income decreases
87 of 180
index numbers
a weighted average of a group of items compared to a given base value of 100
88 of 180
indirect tax
a tax on spending
89 of 180
inferior goods
goods or services that see a fall in demand when incomes rise
90 of 180
a persistent increase in the level of prices
91 of 180
inflationary pressure
occurrences that are likely to lead to increased prices
92 of 180
money that orgiinates outside the circular flow and so will increase national income/output/expenditure
93 of 180
interest rate
the cost of borrowing or the reward for saving
94 of 180
spending by firms on buildings, machinery and improving the skills of the labour force
95 of 180
investment good
a product that will increase in value over time
96 of 180
intangibles such as the provision of insurance or banking services
97 of 180
joint supply
when the production of one good also results in the production of another
98 of 180
John Maynard Keynes suggested how governments could cure mass unemploymeny
99 of 180
labour market
an example of a factor market, where labour is bought and sold
100 of 180
law of unintended consequences
when the actions of consumers, producers and governments have effects that are unanticipated
101 of 180
long run aggregate supply
the economy's productive capacity
102 of 180
marginal external benefit
the spillover benefit to third parties of an economic transaction
103 of 180
marginal external cost
the spillover cost to third parties of an economic transactopm
104 of 180
marginal private benefit
the benefit to an individual or firm of an economic transaction
105 of 180
marginal private cost
the cost to an individual or firm of an economic transaction
106 of 180
marginal social benefit
the full benefit to society of an economic transaction, including private and external benefits
107 of 180
marginal social cost
the full cost to society of an economic transaction, including private and external costs
108 of 180
market clearing price
the price at which all goods that are supplied will be demanded
109 of 180
market demand
total demand in a market for a good, the sum of all individuals' demand at each given price
110 of 180
market failure
when there is a misallocation of resources and the market fails to produce what consumers need at the lowest possible cost
111 of 180
maximum price
a price ceiling which the price of a good or service cannot be above
112 of 180
merit good
a good that would be under-consumed in a free market as consumers suffer from information failure
113 of 180
minimum price
a price floor which the price of a good or service cannot be under
114 of 180
monetary policy
controlling the macroeconomy via changes in monetary variables such as the money supply or interest rates
115 of 180
money supply
the total amount of money in an economy
116 of 180
a market structure dominated by a single seller of a good
117 of 180
multiplier effect
where an increase or decrease in spending leads to a larger than proportionate change in the national income
118 of 180
narrow money
notes, coins and balances available for normal transactions
119 of 180
negative expectations
businesses expect future sales and profits to be less due to factors like falling aggregate demand
120 of 180
negative externalities
costs imposed on a third party external to the market transaction of a good
121 of 180
negative output gap
where the economy is producing less than its trend output
122 of 180
normal goods
goods or services that will see an increase in demand when incomes rise
123 of 180
net government spending
the difference between government spending and taxation
124 of 180
nominal GDP/nominal national income/nominal output
GDP/income/output figures not adjusted for inflation
125 of 180
normative statements
opinions that require value judgements to be made
126 of 180
occupational immobility
as patterns of demand and employment change, workers find it difficult to easily secure new jobs since they could lack the necessary skills
127 of 180
oppurtunity cost
the next best alternative forgone when an economic decision is made/
128 of 180
partial market failure
where the free market provides a product but with a misallocation of resources
129 of 180
participation rates
proportion of the country's population that makes up the country's labour force
130 of 180
planned supply
the amount producers plan to produce at each given price
131 of 180
policy instrument
techniques used to achieve policy objectives
132 of 180
policy objective
government's major macroeconomic objectives
133 of 180
pollution permit
a permit sold to firms by the government, allowing them to pollute up to a certain limit
134 of 180
positive expectations
businesses expect the future sales and profits to improve due to factors like increased aggregate demand
135 of 180
positive externality
a positive spillover effect to third parties of a market transaction
136 of 180
positive output gap
when actual GDP exceeds trend GDP increasing inflationary pressure
137 of 180
positive statements
statements that can be tested against real world data
138 of 180
price ceiling
maximum price
139 of 180
price elasticity of demand
the responsiveness of demand to a change in the price level. The formula is percentage change in quantity demanded divided by percentage change in price
140 of 180
price floor
minimum price
141 of 180
private good
a good that is both excludable and rival in consumption
142 of 180
sale of government owned assets to the private sector
143 of 180
product markets
markets where all kinds of goods and services are traded, eg mobile phone markets
144 of 180
the process that converts factor inputs into outputs of goods and services
145 of 180
production of possibility boundary
the PPB indicates the maximum possible output that can be achieved given a fixed set of resources and technology
146 of 180
productive efficiency
when a firm operates at minimum average total cost, producing the maximum possible output from inputs into the production process
147 of 180
a measure of efficiency, measuring the ratio of inputs to outputs
148 of 180
when total income exceeds total costs
149 of 180
public good
a good that has characteristics of non-rivalry and non-excludability in consumption
150 of 180
quasi-public good
a good that has some of the qualities of a public good but does not fully possess the two required characteristics of non-rivalry and non-excludability
151 of 180
real GDP/real national income/real output
GDP/income/output figures adjusted for inflation
152 of 180
real interest rate
the money rate of interest minus the rate of inflation
153 of 180
recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP)
154 of 180
renewable resources
resources that are able to be replenished whereas non renewable resources such as oil are likely to run out
155 of 180
a withdrawal from the circular flow
156 of 180
the production of a limited range of goods by an individual factor of production or firm or country, in cooperation with others so that together a complete range of goods is produced
157 of 180
a quantity measured at a particular point in time
158 of 180
structural unemployment
unemployment caused by a change in the demand side or supply-side of the economy
159 of 180
payments by government to producers encouraging them to produce a good or service
160 of 180
goods that can be used as alternatives to another good. E.g pepsi is a substitute for coke
161 of 180
the amount offered for sale at each given price level
162 of 180
supply side fiscal policy
changes in the level or structure of government spending and taxation designed to improve the supply side of the economy
163 of 180
supply side shock
something that will increase or reduce the costs
164 of 180
an activity carried out today that does not stop future generations maximising their welfare
165 of 180
tight labour market
where firms have to increase wages to attract the labour that they require
166 of 180
total factor productiviity
the overall productivity of inputs used by a firm in producing a particular level of output
167 of 180
trade union
an organisation of workers set up to negotiate on wages, working hours and working conditions with employers on behalf of its members
168 of 180
trade off
where one macroeconomic objective has to be restricted in favour of another objective
169 of 180
transfer payments
government payments to individuals for which no service is given in return eg state benefits
170 of 180
transmission mechanism of monetory policy
how changes in the base interest rate influence the components of aggregate demand
171 of 180
those without a job but who are seeking work at current wage rates
172 of 180
unemployment trap
where individuals receive more in benefit payments than they would be paid if they were in a job
173 of 180
value judgements
statements or opinions expressed that are not testable or cannot be verified and depend on an inidividual views
174 of 180
variable costs
costs of production that vary with output
175 of 180
exports or imports that are tangible, that you can see and touch as it crosses international boundaries
176 of 180
voluntary unemployment
workers who are not prepared to take a job at current wage levels
177 of 180
a stock of owned assets, eg housing property
178 of 180
any money not passed on in the circular flow and has the effect of reducing national income
179 of 180
where a commodity is given a weighting proportional to its importance in the pattern of consumer spending
180 of 180

Other cards in this set

Card 2


the amount that producers in fact produce. This can differ from planned supply as there can be breakdowns in production


actual supply

Card 3


total planned expenditure in the economy. Formula is C +I +G + (x-m


Preview of the back of card 3

Card 4


the total value of goods and services supplied in the economy


Preview of the back of card 4

Card 5


this is achieved in an economy when it is not possible to make anyone better without making someone worse off or you cannot produce more of one good without making less of another


Preview of the back of card 5
View more cards


No comments have yet been made

Similar Economics resources:

See all Economics resources »