Macro keywords

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Macroeconomics
involves the study of the whole economy at the aggregate level.
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Policy Objective
A target or goal that policy-makers aim to 'hit'.
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Short-run economic growth
Growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy.
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Long-run economic growth
An increase in the economy's potential level of real output, and an outward shift of the economy's production possibility frontier.
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Gross domestic product (GDP)
The sum of all goods and services, or level of output, produced in the economy over a period of time, e.g. one year.
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Real GDP
A measure of all the goods and services produced in an economy, adjusted for price changes or inflation.
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Nominal GDP
GDP measured at the current market prices, without removing the effects if inflation.
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Recession
A fall in real GDP for 6 months or more.
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Full Employment
Full employment means 3% or less of the labour force market unemployed
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Claimant Count
The method of measuring unemployment according to those people who are claiming unemployment-related benefit (Jobseeker's Allowance)
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Labour Force Survey
A quarterly sample survey of households in the UK. Its purpose is to provide information on the UK labour market. The survey seeks information on respondents' personal circumstances and their labour market status during a period of 1-4 weeks.
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Inflation
A persistent or continuing rise in the average price level.
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Deflation
A persistent or continuing fall in the average price level.
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Disinflation
When the rate of inflation is falling, but still positive.
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Price Index
An index number showing the extent to which a price, or a 'basket' of prices has changed over a month, quarter or a year, in comparison wth the price(s) in a base year.
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Consumer Prices Index (CPI)
The official measure used to calculate the rate of consumer price inflation in the UK. The CPI calculates the average price increase of a basket of 700 different consumer goods and services.
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Retail Prices index (RPI)
The RPI is an older measure used to calculate the rate of consumer price inflation in the UK.
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Indexation
The automatic adjustment of items such as pensions and welfare benefits to changes in the price level, through the use of a price index.
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Balance of Payments
A record of all the currency flows into and out of a country in a particular time period.
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Current account of the balance of payments
Measures all the currency flows intoand ot of a country in a particular time period in payment for exports and imports, together with income and transfer flows.
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Exports
Domestically produced goods or services sold to residents of other countries.
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Imports
Goods or services produced in other countries and sold to residents of this country.
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Balance of trade
The difference between the money value of a country's imports and its exports. Balance of trade is the largest component of a country's balance of payments on current account.
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Balance of trade deficit
The money value of a country's imports exceeds the money value of its exports.
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Balance of trade surplus
The money value of a country's exports exceeds the money value of its imports.
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Balanced budget
When government spending equals government revenue, which is mostly tax revenue.
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Budget Deficit
When government spending is greater than government revenue.
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Policy Conflict
Occurs when two policy objectives cannot both be achieved at the same time: the better the performance in achieving one objective, the worse the performance in achieving the other.
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Trade-off between policy objectives
Although it may be impossible to achieve 2 desirable objectives at the same time, e.g. 0 inflation and full time employment, policy-makers may be able to choose an acceptable combination lying between the extremes, e.g. 2% inflation & 4% unemployment
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Keynesian Economists
Followers of the economist John Maynard Keynes, who generally believe that governments should manage the economy, particularly through the use of fiscal policy.
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Pro-free market economists
Opponents of Keynesian economists, who dislike government intervention in the economy and who much prefer the operation of free markets.
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Monetary Policy
The us by the government and its agent, the Bank of England, of interest rates and other monetary instruments to try to achieve the government's policy objectives.
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Fiscal Policy
The use by the government of government spending and taxation to try to achieve the government's policy objectives.
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Performance indicator
Provides information for judging the success or failure of a particular type of government policy such as fiscal/monetary policy.
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National income
the flow of new output produced by the economy in a particular period (e.g. a year)
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National output
The same as national income, namely the flow of new output produced by the economy in a particular period (e.g. a year)
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National product
Another name for national incme and national output.
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Consumption
Total planned spending by households on comsumer goods and services produced within the economy.
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Closed Economy
An economy with no international trade
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Saving
Income which is not spent
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Withdrawal
A leakage of spending power out of the circular flow of income into savings, taxation or imports.
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Investment
Total planned spending by firms on capital goods produced within the economy
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Injection
Spending entering the circular flow of income as a result of investment, government spending and exports.
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Open Economy
An economy open to international trade.
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Reflationary Policies
Policies that increase aggregate demand with the intention of increasing real output and employment.
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inflation
A continuing rise in the price level.
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Equilibrium national income
the level of real output at which aggregate demand equals aggregate supply.
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aggregate demand
the total planned spending on real output produced within the economy.
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aggregate supply
the level of real national output that producers are prepared to supply at different average price levels.
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Economic shock
an unexpected event hitting the economy. Economic shocks can be demand-side or suppky-side shocks (and sometimes both) and unfavourable or favourable.
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Consumption
total planned spending by households on consumer goods and services produced within the economy.
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rate of interest
the reward for lending savings to somebody else (e.g. a bank) and the cost of borrowing.
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life-cycle theory of comsumption
a theory that explains consumption and saving in terms of how people expect their incomes to change over the whole of their life cycles.
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Availability of credit
funds available for households and firms to borrow
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credit crunch
occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to obtain financing, and leads to a rise in the cost of borrowing.
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distribution of income
the spread of different incomes among individuals and differnt income groups in the economy.
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accelerator
a change in the level of investment in new capital goods is induced by a change in the rate of growth of national income or aggregate demand.
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multiplier
the relationship between a change in aggregate demand and the resulting usually larger change in national income.
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Marginal propensity to consume
the fraction of an increase in disposable income (income after tax) that people plan to spend on domestically produced consumer goods.
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short-run aggregate supply (SRAS)
Aggregate supply when the level of capital is fixed, though the utilisation of existing factors of production can be altered so as to change the level of real output.
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long-run aggregate supply (LRAS)
Aggregate supply when the economy is producing at its production potential. If more factors of productionbecome available or productivity rises, the LRAS curve shifts to the right.
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Deflation
a continuing fall in the price level
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technical progress
new and better ways of doing things
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Other cards in this set

Card 2

Front

A target or goal that policy-makers aim to 'hit'.

Back

Policy Objective

Card 3

Front

Growth of real output resulting from using idle resources, including labour, thereby taking up the slack in the economy.

Back

Preview of the back of card 3

Card 4

Front

An increase in the economy's potential level of real output, and an outward shift of the economy's production possibility frontier.

Back

Preview of the back of card 4

Card 5

Front

The sum of all goods and services, or level of output, produced in the economy over a period of time, e.g. one year.

Back

Preview of the back of card 5
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